• Rt Hon David Lidington CBE MP Chancellor of the Duchy of Lancaster and the Minister for the Cabinet Office Cabinet Office 70Whitehall London SW1A2AS Web www.cabinetoffice.gov.uk Our Ref: CDL/1566 Sarah Wollaston MP Chair, Liaison Committee House of Commons London SW1A OM 15 March 2018 Dear Sarah, Thank you for your letter of 22nd February, following my appearance before the Liaison Committee on 7 February. In your letter you cover areas that I undertook to respond to in the Committee session, as well as some further questions from Committee Members subsequent to the session. The responses to these questions are provided below. RT HON DAVID LIDINGTON CBE MP
Transcript
bull Rt Hon David Lidington CBE MP Chancellor of the Duchy of Lancaster and the Minister for the Cabinet Office
Cabinet Office 70Whitehall London SW1A2AS
Web wwwcabinetofficegovuk
Our Ref CDL1566
Sarah Wollaston MP Chair Liaison Committee House of Commons London SW1A OM
15 March 2018
Dear Sarah
Thank you for your letter of 22nd February following my appearance before the Liaison Committee on 7 February In your letter you cover areas that I undertook to respond to in the Committee session as well as some further questions from Committee Members subsequent to the session The responses to these questions are provided below
RT HON DAVID LIDINGTON CBE MP
1 The Minister agreed to provide the Committee with as comprehensive a list of Carilions public-sector contracts as is av~ilable (See q35) It would be helpful if information could also be provided on the current estimate of Government spending with each of the strategic suppliers We should ask what provision is made in the Cabinet Office for consolidating this kind of information from across all government departments and public bodies in respect ofall strategic suppliers and contractors
During the hearing I undertook to write with details of Central Government contracts subject to the limitations of the data that we hold and confidentiality issues for example where the Official Receiver is engaged in negotiations
I am able to provide the following details relating to these contracts Contracting Authority Government Department and Contract Name This list is provided at Annex B
I am not able to provide the following details
bull PFI subcontracts - these are contractsmiddotheld between the Special Purpose Vehicle (a private company) and Carillion As John Manzoni stated in his response this information belongs to the Special Purpose Vehicles (SPV) and Carillion Government is not a party to these subcontracts In light of the public safety risk resulting from any collapse contingency plans were developed jointly by the SPVs and NHS Trusts
bull University construction contracts - these are between the University and their contractor The Department for Education is not party to these contracts and therefore does not hold any information middot
bull Contracts held by Devolved Administrations- we do not hold contractual information We engaged with the Devolved Administrations to ensmicrore they were aware of the need to undertake contingency planning
bull Information on three contracts has been redacted due to their sensitive nature middot bull Revenue information - this information is commercially sensitive The Official
Receiver is in the process of conducting commercial negotiations to sell the Carillion contracts and therefore any publication of revenue information may impact the Official Receivers negotiating position
Following the collapse of Carillion there have been no significant impacts to service delivery across public sector contracts Minor impacts to service within the first week were quickly resolved
The Cabinet Office works with all Central Government bodies to understand the portfolio of contracts held by each Strategic Supplier Data for other suppliers is held by the Department or ALB holding contracts with that supplier Annex A contains an estimate of the revenue that each Strategic Supplier earns from the UK public sector
It would not be feasible to collate data from all public bodies in respect of all contractors We estimate that between 750 and 900 new opportunities are advertised every month that are over the statutory thresholds
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2 For outsourcing to be sustainable the risk of strategic providers failing must be middot managed effectively How does Government assess and manage risk in its relationship with these providers so they are less likely to fail and it is less catastrophic if they do fail Other than close monitoring by Government what consequences do strategic suppliers face when they become higher risk (financially fragile) For example Should the Government require strategic suppliers to maintain a safe level of capital on their balance sheet (For background see qq1-6 to the CampAG)
The risk of strategic suppliers failing is managed at two levels At contract level financial distress clauses usually give contracting authorities rights up to and including termination to protect services in the event of supplier failure In addition Parent Company Guarantees give recourse to properly capitalised entities wh~re as is common the contract is actually held by a subsidiary Performance bonds that can be claimed in the event of default or nonshyperformance are also common on Construction contracts
At a srategic level where a supplier holds contracts across multiple Departments and their revenue from Government exceeds pound1 OOm per annum andor the suppliers is deemed a significant supplier to Government in their sector it is classified as a Strategic Supplier It thus falls within the scope of themiddot Strategic Supplier Risk Management (SSRM) policy This policy contains triggers that allow Government to take action in the event of financial distress These actions include reducing where possible the extent to which the Strategic Supplier is given additional work under the terms of an existing contract (by for example the exercise of any middotoption or change requests) so as to contain the risk to the taxpayer In addition we can demand data and regular interactions with the company depending on the risk rating assigned to the company
Companies of different sizes and in different sectors require different capital structures so there is no such thing as a one-size safe level of capital This safe level is dependant on the nature of business size of business trading conditions and the nature size and duration of contracts This is why each procurement uses appropriate and individually tailored tests of financial standing for that particular contracting situation
3 How does the Government justify the continued use ofan optimism bias adjustment within its Value for Money assessments for publicly funded projects but not for privately financed projects given that it is now clear that private sector contractors are equally capable of over optimism when bidding or forecasting costs (For background see qq1-6 to the CampAG)
What is being delivered through a privately financed project (ie under PFIPF2) is typically a building or asset An optimism bias will be included for Privately financed projects in their value for money analysis until the contract is signed as then the estimated costs of building and maintaining that asset are the responsibility of the vendor We do not need to add contingency or optimism bias to them as they are fixed for us the vendor is responsible for any errors in the estimates
In most of these PFIPF2 arrangements the whole life pricing risk has been transferred to the contractor The optimism bias that might be included in a publicly funded project of similar scope is built into the price bid by the SPV and we expect the SPV to honour that price
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4 Has any of the pound150 million Government funding to support the work of the official receiver been used to ensure ongoing short-term delivery of SPVIPFI contracts If somiddot what proportion ofthe pound150 million has been used in this way Is pound150 million your best internal estimate or will the final amount needed to support the work of the official receiver end up being much higher
The Cabinet Office is to provide pound150m of funding to the Official Receiver in respect of Carillion in liquidation in the current financial year This f_unding was identified in Supplementary Estimates laid before Parliament on 7 February 2018
Some of the funding will be used by the Official Receiver to provide working capital to the company in liquidation This allows former Carillion employees and the Carillion supply chain to continue to supply services where the end customer is a public sector entity In the case of SPVPFI arrangements these services are supplied under contract to the SPV which then in turn is contracted to the NHS Trust or school Any sums spent on such delivery will be recovered from the SPV in question It is not possible to estimate at this stage what proportion of the pound150m will be used to ensure the ongoing short term delivery of SPVPFI contracts
In addition to this working capital the pound150m is intended to cover the cost~ of the liquidation which include the responsibility for making Carillion construction sites safe and secure irrecoverable VAT due to change of status of Carillion to a company in liquidation some back office costs relating to the on-going operation of the companymiddotand the fees of the Official Receiver Special Managers and their Professional Advisers The Official Receiver will be looking to raise funds from recovering trade debts owed to Carillion settlement of claims owed to Carillion and from the sale of assets These funds will be applied in line with statutory duties of the Official Receiver and used to offset funding provided by the Cabinet Office to the Official Receiver in respect to Carillion in liquidation Any unused funding wm be returned to the Cabinet Office
5 Do the assets which are under the control of the Official Receiver (OR) and are to be sold include SPVIPFI contracts (See q53)
Carillion was involved in a number of different PFI contracts Carillion normally was an equity shareholder in the SPV during the construction phase of a project then became a subcontractor to th~ SPV to provide ongoing services and subsequently sold its equity holding
The contracts which can potentially be sold by the Official Receiver include a number of PFlshyrelated service contracts These contracts were between a Carillion entity and the SPV and the SPV in turn held the main PFI contract with the public body The SPV has the right to terminate these contracts upon liquidation Some of these contracts can be sold as assets as they have a long time to run but this is subject to the consent of the SPV
Carillion did have partial equity holdings in some of the PFls where construction was still in process such as the Midland Metropolitan Hospital in Smethwick the Royal Liverpool University Hospital and the Aberdeen Western Peripheral Route Carillion was one of several shareholders in each SPV The Official Receiver can sell the equity shareholding to the other shareholders (or potentially to a third party) if the equity has any value
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6 Under insolvency legislation when selling company assets the Official Receiver is under a statutory duty to achieve the best price he can for the benefit of the creditors as a whole What guidance (if any) are you giving the OR on what would be an acceptable level of difference between the original contract value and the price achieved in a liquidation situation to ensure best value for the taxpayer in selling of Carilions assets (See q62 qq131-134)
HM Government is not giving guidance to the Official Receiver on the acceptable value of contracts The Officials Receiver is a court appointed official and his duties are set out in statute as noted above
The question implies a misunderstanding hoVl(ever There are different meanings of the word value at play here The original contract value (as published in the OJEU or on Contracts Finder) is the anticipated annual price paid by the customer (the contracting authority) for the services multiplied by the maximum number of years the contract could runs for whereas the price achieved in a liquidation situation is the value attributed by a replacement supplier to the cash flows and profit achievable if they were to take on and complete the contract at the original price
This is quite a complicated calculation and involves for example the perceived risk of the contract the match with the replacement suppliers current business and alternative uses of that suppliers capital For example a contract with a contract value of pound1 Orn per year for 5 years ie pound50m which is making 5 profit on sales will yield a profit of pound25m over that term If a potential buyer feels there is no risk in that contract and it has 2 years yet to run they might bid up to pound125m for it but that purchase cost would wipe out all the anticipated contract profit so realistically they would probably only offer pound03m to pound06m for it as they also have to make a return on that pound03m middot
7 What are the implications of government stepping into private sector SPVs (See q 135) Is there something in the contractual structures of the SPV model that mean SPVIPFI contracts could not be taken over by the Government (See q141)
HMG did not step in to (terminate and take over) the private sector SPVs Had the Officials Receiver not temporarily covered the staff and overheads cost of the Carillion subcontracts then the SPV would have been immediately responsible for continuing the service and finding a replacement subcontractor In all likelihood this would have resulted in serious service disruption However a short period of no or poor service performance is unlikely to have led to a contractor default enabling termination of the contract
The SPV in a PFI cont~act has subcontracts for construction and FM An insolvency of a subcontractor is not a breach of the main contract with HMG There is no right for HMG to terminate as no contractor event of default has occurred It is the SPVs responsibility to replace the subcontractor formiddot no change in price to HMG It is possible to voluntarily terminate the contract with the SPV but this is very expensive and so not appropriate as it fully pays out the lenders and compensates the SPV for future loss of profits In extreme cases the SPV may in due course become insolvent if the cost to complete the project is significantly higher than the original cost
In the case of Carillions failure Carillion was contracted with the SPV to perform certain services ( either construction or FM) The PFI contracts place the responsibility for replacing
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Carillion with the SPV To the extent that Carillions failure has led to a breach of the SPVs contract with the public sector customer the contracts allow the SPV some time to repair the breach and in addition if the SPV fails then the lenders also have an opportunity to effect a repair If all these attempts fail then the PFI contract can be terminated and there are defined procedures that determine the rights of all parties including the public sector entity holding the contract
B What asse~sment have you made of the impact the collapse of Carillion has had on its subcontractors What level of losses have Carilions subcontractors incurred What impact has the collapse had on smaller contractors who may find it difficult to get support from banks due to their increased credit risk Did the governments attempt to keep Carillion going further increase the financial pressure on its subcontractors as their credit risk increased How many subcontractors will go out ofbusiness
Carillions debts are still being assessed by the Official Receiver but there is no doubt that many subcontractors were owed money by Carillion Those subcontractors that are owed money are being encouraged to register claims as unsecured creditors
The Government has put measures in place to help companies who are impacted by Carillions insolvency including extra support from the banks and time to pay taxes
Lenders have made a fund of pound900m available to support small businesses exposed to Carillions liquidation - and a Government taskforce led by the Secreatry of State for Business Energy and Industrial Strategy has been set up to monitor and advise on mitigating the impacts of Carillions liquidation on construction firms particularly SMEs and those working in the sector middot
The British Business 3ank through its Enterprise Support Scheme will guarantee loans of up to pound1 OOm through its partner banks which can be used to support overdraft borrowing and refinancing of existing debt
Lenders are contacting customers and where appropriate are putting in pl~ce emergency measures including overdraft extensions payment holidays and fee waivers to ensure those facing short term issues can be helped to stay on track
We dispute that government made an attempt to keep CariUion going further This was confirmed by the oral evidence of former Carillion directors to the joint PACACPAC session on 27 February 2018 Contracts which were awarded after Carillions profit warnings were only let to Carillion under the relevant procurement regulations and only where financial standing tests were still met It would be inappropriate for Government to award contracts to suppliers in order to prop them up and consideration of any such factors would be contrary to public procurement law We regret any financial pressure on subcontractors that has flowed from the failure of Carillion but deny that there is any link between Government action and that financial pressure
9 What assessment has Government made ofthe impact ofCarilions failure to honour the prompt payment code for its sub-contractors or whether it has put any of them into financial distress How will Government encourage better compliance with prompt payment and ensure that such codes have credibility (See qq73-79)
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In 2015 BEIS strengthened the Prompt Payment Code All of the governments Strategic Suppliers have signed up to the Code - promising to pay suppliers promptly and fairly
The Small eusiness Commissioner (SBC) role was created by the Enterprise Act 2016 to tackle late payment and poor payment practices in the private sector and Paul Uppal was appointed in the post in December 2017 The SBC is an independent public body and covers the whole of the United Kingdom
The SBC will provide general advice and information to small businesses on matters such as resolving disputes signpost small businesses to existing support and dispute resolution services through the SBCs website and consider complaints about payment issues between small business suppliers and their larger customers making (non-binding) recommendations on how the parties should resolve their disputes
In the 2017 Manifesto it says Government will be harnessing its buying power to ensure that its big contractors comply with the principles of the Prompt Payment Code We are deveroping the detail of how this will work within the procurement rules
In October 2017 the Government announced that it was looking at how a suppliers payment performance can be considered as part of the procurement process when bidding for public contracts We are working through the detail of how this will operate within the framework of the Public Contracts Regulations and will consult on our proposals soon
10 How many apprentices were employed by Carilions subcontractor companies before its collapse (See qq 88 99) What assessment has been made of the impact on apprenticeships with companies in financial trouble because of Carilions collapse (See q102)
Mr Halton asked how many apprentices within Carillions supply chain would be affected by its insolvency
In total the Carillion Group had over 9000 UK subcontractors Any assessment of the number of apprentices affected would require the identification of these sub-contractors followed by an individual analysis both of the number of apprentices employed by each one and how Carillions liquidation might affect it
During the Committee hearing Gareth Rhys Williams said that a number of apprentices being trained by Carillion Training Services (CTS) were employed by Carillion subcontractors In fact all of the apprentices being trained by CTS arewere employed by Carillion although many were seconded to other firms in the industry which then reimbursed Carillion for their employment costs
The Carillion Group employed andor trained some 1400 1Apprentices at the point of liquidation The Construction Industry Training Board (CITB) has been working to find new employment for these Apprentices including the provision of financial incentives to new employers To date some 753 Apprentices in England have been matched with new
1 This figure excludes Level 1 Learners who have been offered places on alternative courses
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employers and approximately a further 180 have either completed their courses or decided to pursue other activities
The CITB remains confident of finding potential construction industry employers for all Apprentices who wish to complete their training The CITB has also worked with the Education and Skills Funding Agency to ensure funding is available to support the continued training of these Apprentices and Level 1 Learners
11 What reassurance can you provide about government contingency plans for other large government contractors (See qq116-121)
As John Manzoni said i~ the hearing government has contingency plans for a range of circumstances including possible difficulties faced by other large contractors These plans are proportionate to the criticality of the services supplied and the perceived level ofrisk
12 What will be the net cost for the Health Service of the collapse of Carillionmiddot for example due to legal and other costs associated with changing contracts (See q 130)
The net cost for NHS Trus_ts in changing services contracts under PFI arrangements should be restricted primarily to legal costs in inspecting the form of consent required to enable the SPV to change their subcontractor from Carillion to a new company If the Trusts wish to examine other opportunities such as changes to the main contract these costs may be higher but these are matters for the relevant Trust boards
The situation with regards to the two hospitals under construction is different Followin~ the failure of Carillion under PFI arrangements it is the responsibility of the Project Company (SPV) to find a new construction partner Both SPVs have identified possible candidates These replacement partners have been estimating the cost _to complete the respective hospitals Following these estimates it is up to the SPV to determine with its lenders the most appropriate wa_y to complete and maintain the hospital
13 How did the government consider how the collapse of Carillion could provide an opportunity for Government to exit an expensive PFI contract in respect of the health sector What opportunities still exist to exit such NHS contracts (See also qus 4-7 above)
The immediate priority for Government following the collapse of Carillion was to maintain public services It was important that cleaning porterage and other services continued so that hospitals and other health facilities could continue to operate at full capacity in the middle of winter The opportunities to exit these contracts have been considered alongside other options for the continuation of public services and within the constraints of the contracts which confer rights and place obligations on the counterparties
For the two PFI hospitals in construction the SPV and the lenders have committed the bulk of the investment needed to build the hospital and spent the majority of the money already They have a contractual right to be given time to try and find an alternativecontractor to finish the building work
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For the hospitals and schools that were built using private finance upfront and where Carillion was providing Facilities Management and maintenance services via an SPV in the days following the liquidation the Official Receiver offered to step in with the same contingency services it was offering to other public services contracts to avoid any risk that public services would be disrupted even for a short time It would have been possible for the OR to stop providing these services and the SPVs are contractually obliged to find an alternative Facilities Management provider This would have taken some time and likely led to some disruption
Without the intervention of the Official Receiver some important public services would likely have suffered at least-a temporary disruption but the SPV would have had time to correct that loss of service and it would not have constituted a breach under the PFI contract such as to justify termination for cause
14 What delays are now expected to the completion of the two hospital construction projects in which Carillion was involved
Midland Metropolitan Hospital
The contract between the Trust and the SPV is still in place which means that the SPV is still contractually obliged to manage the project and find another construction or facilities
middot management services subcontractor who can continue to deliver the building work and subsequent services
The SPV is currently in discussions With the Official Receiver its lenders and with other service and construction companies and the Trust to assess how best to continue delivering these contracts
Royal Liverpool University Hospital
The PFI company at Royal Liverpool is in discussions with the Department for Health and Social Care the Trust and its senior lenders about the prospect of completing construction and delivering the subsequent services middot
The Trust Chief Executive issued a statement on 6 February 2018
In order to get construction started as soon as possible The Hospital Company is working to secure the services of existing sub-contractors and former Carillion construction staff to continue the work This is because they have the best understanding of the work that is required to finish the job
There are highly complex discussions taking place between various parties to get subshycontractors back on site as soon as possible However many of these firms are facing financial difficulties as a result of Carilfions collapse therefore this process will take some time Given this situation we expect a significant delay and it will prove challenging to get the new Royal finished before the end of the year
The Trust is doirig all it can to minimise the delay Our local politicians and others have all been hugely supportive and we will continue to liaise closely with them and the Department of Health We all want the best for our patients and the people of Liverpool and that is to move into our world class new hospital
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15 What additional costs the official receiver and PWC have charged to which councils related to the transfer ofcontracts previously held with Carillion by those councils and what (a) financial and (b) other support the Government is providing to each of those councils related to such charges (See Qq 12426)
All customers that have received services following 15 January 2018 have been charged an uplift because of additional costs This uplift allows for the extra costs of supplying services resulting from the contraction of Carillions operation and the costs of the liquidation As Carillions fltgtrmer customers migrate to alternative providers the fixed costs at the centre of Carillion - IT back Office services call centres - have to be spread across a smaller number of contracts For public sector customers we anticipate a reconciliation process at some later point when a more accurate estimate of these extra costs has been gained Considerably higher additional costs would have been incurred if services to councils and other public sector customers had been discontinued and these have been avoided middot
In addition during the hearing Mr Jenkin asked about why Government is not getting first refusal on contracts and extracting value (Q131-141) I provide details on thispoint below middot
Where a public sector body is the direct customer of Carillion Government does effectively have first refusal on these contracts In the case of the MoJ (National Offender Management Service) contracts discussed in the Committee hearing Government is taking services back in-house through a Government-owned service company This action will transfer the employment of 1000 former Carillion staff to this service company and transfer a number of subcontracts These subcontractors employ a further 130 peple
This decision is open to any contracting authority holding a direct contract with Carillion In making such a decision the authority has to weigh up a number of considerations such as operational risk and value for money Both of these considerations are impacted by the speed of transition as the Official Receiver (OR) cannot sustain the former Carillion operations indefinitely and also as customers transition away from Carillion the remaining operations have to carry a higher burden of overhead and become more costly to run
The public sector does not have to put in an offer for these contracts Customers rely on the termination provisions in the existing contract with Carillion The OR is facilitating the transfer of former Carillion staff to new employers and to date over 8216 jobs have been preserved in this way
For the majority of relevant Carillion contracts the contract was between Carillion and a Project Company ($PV) which had been set up as part of PFI or PF2 arrangements This SPV then provides services to the public body concerned for example a hospital trust or a school The contract impacted by the liquidation was between Carillion and the SPV and not
between Carillion and the trust or school The risk of providing services has been passed by the PFI contract from the public body to the SPV The SPV must choose exactly how to continue that provision following the liquidation subject to the rights of the lenders The public body concerned does not have the option of taking services ~ack in house as a result of the liquidation as the SPV is not in liquidation
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The OR has reached agreement with a major supplier to transfer part of Carillions business that fulfilled some of these service contracts with SPVs The supplier has agreed to pay the OR a consideration for this transfer which is subject to the agreement of those SPVs and the consent of the end customer
The OR is bound (by its legal obligations) to make a judgement regarding which course of a_ction returns the most value to the creditors of the liquidation It is also the ORs judgement that this bulk transfer offers the 111ost quick and efficient way to transfer these contracts to new management with the lowest risk of operational disruption to public services
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Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
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Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
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Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
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Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
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Note market data correct as of 9 March 2018
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1 The Minister agreed to provide the Committee with as comprehensive a list of Carilions public-sector contracts as is av~ilable (See q35) It would be helpful if information could also be provided on the current estimate of Government spending with each of the strategic suppliers We should ask what provision is made in the Cabinet Office for consolidating this kind of information from across all government departments and public bodies in respect ofall strategic suppliers and contractors
During the hearing I undertook to write with details of Central Government contracts subject to the limitations of the data that we hold and confidentiality issues for example where the Official Receiver is engaged in negotiations
I am able to provide the following details relating to these contracts Contracting Authority Government Department and Contract Name This list is provided at Annex B
I am not able to provide the following details
bull PFI subcontracts - these are contractsmiddotheld between the Special Purpose Vehicle (a private company) and Carillion As John Manzoni stated in his response this information belongs to the Special Purpose Vehicles (SPV) and Carillion Government is not a party to these subcontracts In light of the public safety risk resulting from any collapse contingency plans were developed jointly by the SPVs and NHS Trusts
bull University construction contracts - these are between the University and their contractor The Department for Education is not party to these contracts and therefore does not hold any information middot
bull Contracts held by Devolved Administrations- we do not hold contractual information We engaged with the Devolved Administrations to ensmicrore they were aware of the need to undertake contingency planning
bull Information on three contracts has been redacted due to their sensitive nature middot bull Revenue information - this information is commercially sensitive The Official
Receiver is in the process of conducting commercial negotiations to sell the Carillion contracts and therefore any publication of revenue information may impact the Official Receivers negotiating position
Following the collapse of Carillion there have been no significant impacts to service delivery across public sector contracts Minor impacts to service within the first week were quickly resolved
The Cabinet Office works with all Central Government bodies to understand the portfolio of contracts held by each Strategic Supplier Data for other suppliers is held by the Department or ALB holding contracts with that supplier Annex A contains an estimate of the revenue that each Strategic Supplier earns from the UK public sector
It would not be feasible to collate data from all public bodies in respect of all contractors We estimate that between 750 and 900 new opportunities are advertised every month that are over the statutory thresholds
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2 For outsourcing to be sustainable the risk of strategic providers failing must be middot managed effectively How does Government assess and manage risk in its relationship with these providers so they are less likely to fail and it is less catastrophic if they do fail Other than close monitoring by Government what consequences do strategic suppliers face when they become higher risk (financially fragile) For example Should the Government require strategic suppliers to maintain a safe level of capital on their balance sheet (For background see qq1-6 to the CampAG)
The risk of strategic suppliers failing is managed at two levels At contract level financial distress clauses usually give contracting authorities rights up to and including termination to protect services in the event of supplier failure In addition Parent Company Guarantees give recourse to properly capitalised entities wh~re as is common the contract is actually held by a subsidiary Performance bonds that can be claimed in the event of default or nonshyperformance are also common on Construction contracts
At a srategic level where a supplier holds contracts across multiple Departments and their revenue from Government exceeds pound1 OOm per annum andor the suppliers is deemed a significant supplier to Government in their sector it is classified as a Strategic Supplier It thus falls within the scope of themiddot Strategic Supplier Risk Management (SSRM) policy This policy contains triggers that allow Government to take action in the event of financial distress These actions include reducing where possible the extent to which the Strategic Supplier is given additional work under the terms of an existing contract (by for example the exercise of any middotoption or change requests) so as to contain the risk to the taxpayer In addition we can demand data and regular interactions with the company depending on the risk rating assigned to the company
Companies of different sizes and in different sectors require different capital structures so there is no such thing as a one-size safe level of capital This safe level is dependant on the nature of business size of business trading conditions and the nature size and duration of contracts This is why each procurement uses appropriate and individually tailored tests of financial standing for that particular contracting situation
3 How does the Government justify the continued use ofan optimism bias adjustment within its Value for Money assessments for publicly funded projects but not for privately financed projects given that it is now clear that private sector contractors are equally capable of over optimism when bidding or forecasting costs (For background see qq1-6 to the CampAG)
What is being delivered through a privately financed project (ie under PFIPF2) is typically a building or asset An optimism bias will be included for Privately financed projects in their value for money analysis until the contract is signed as then the estimated costs of building and maintaining that asset are the responsibility of the vendor We do not need to add contingency or optimism bias to them as they are fixed for us the vendor is responsible for any errors in the estimates
In most of these PFIPF2 arrangements the whole life pricing risk has been transferred to the contractor The optimism bias that might be included in a publicly funded project of similar scope is built into the price bid by the SPV and we expect the SPV to honour that price
3
4 Has any of the pound150 million Government funding to support the work of the official receiver been used to ensure ongoing short-term delivery of SPVIPFI contracts If somiddot what proportion ofthe pound150 million has been used in this way Is pound150 million your best internal estimate or will the final amount needed to support the work of the official receiver end up being much higher
The Cabinet Office is to provide pound150m of funding to the Official Receiver in respect of Carillion in liquidation in the current financial year This f_unding was identified in Supplementary Estimates laid before Parliament on 7 February 2018
Some of the funding will be used by the Official Receiver to provide working capital to the company in liquidation This allows former Carillion employees and the Carillion supply chain to continue to supply services where the end customer is a public sector entity In the case of SPVPFI arrangements these services are supplied under contract to the SPV which then in turn is contracted to the NHS Trust or school Any sums spent on such delivery will be recovered from the SPV in question It is not possible to estimate at this stage what proportion of the pound150m will be used to ensure the ongoing short term delivery of SPVPFI contracts
In addition to this working capital the pound150m is intended to cover the cost~ of the liquidation which include the responsibility for making Carillion construction sites safe and secure irrecoverable VAT due to change of status of Carillion to a company in liquidation some back office costs relating to the on-going operation of the companymiddotand the fees of the Official Receiver Special Managers and their Professional Advisers The Official Receiver will be looking to raise funds from recovering trade debts owed to Carillion settlement of claims owed to Carillion and from the sale of assets These funds will be applied in line with statutory duties of the Official Receiver and used to offset funding provided by the Cabinet Office to the Official Receiver in respect to Carillion in liquidation Any unused funding wm be returned to the Cabinet Office
5 Do the assets which are under the control of the Official Receiver (OR) and are to be sold include SPVIPFI contracts (See q53)
Carillion was involved in a number of different PFI contracts Carillion normally was an equity shareholder in the SPV during the construction phase of a project then became a subcontractor to th~ SPV to provide ongoing services and subsequently sold its equity holding
The contracts which can potentially be sold by the Official Receiver include a number of PFlshyrelated service contracts These contracts were between a Carillion entity and the SPV and the SPV in turn held the main PFI contract with the public body The SPV has the right to terminate these contracts upon liquidation Some of these contracts can be sold as assets as they have a long time to run but this is subject to the consent of the SPV
Carillion did have partial equity holdings in some of the PFls where construction was still in process such as the Midland Metropolitan Hospital in Smethwick the Royal Liverpool University Hospital and the Aberdeen Western Peripheral Route Carillion was one of several shareholders in each SPV The Official Receiver can sell the equity shareholding to the other shareholders (or potentially to a third party) if the equity has any value
4
6 Under insolvency legislation when selling company assets the Official Receiver is under a statutory duty to achieve the best price he can for the benefit of the creditors as a whole What guidance (if any) are you giving the OR on what would be an acceptable level of difference between the original contract value and the price achieved in a liquidation situation to ensure best value for the taxpayer in selling of Carilions assets (See q62 qq131-134)
HM Government is not giving guidance to the Official Receiver on the acceptable value of contracts The Officials Receiver is a court appointed official and his duties are set out in statute as noted above
The question implies a misunderstanding hoVl(ever There are different meanings of the word value at play here The original contract value (as published in the OJEU or on Contracts Finder) is the anticipated annual price paid by the customer (the contracting authority) for the services multiplied by the maximum number of years the contract could runs for whereas the price achieved in a liquidation situation is the value attributed by a replacement supplier to the cash flows and profit achievable if they were to take on and complete the contract at the original price
This is quite a complicated calculation and involves for example the perceived risk of the contract the match with the replacement suppliers current business and alternative uses of that suppliers capital For example a contract with a contract value of pound1 Orn per year for 5 years ie pound50m which is making 5 profit on sales will yield a profit of pound25m over that term If a potential buyer feels there is no risk in that contract and it has 2 years yet to run they might bid up to pound125m for it but that purchase cost would wipe out all the anticipated contract profit so realistically they would probably only offer pound03m to pound06m for it as they also have to make a return on that pound03m middot
7 What are the implications of government stepping into private sector SPVs (See q 135) Is there something in the contractual structures of the SPV model that mean SPVIPFI contracts could not be taken over by the Government (See q141)
HMG did not step in to (terminate and take over) the private sector SPVs Had the Officials Receiver not temporarily covered the staff and overheads cost of the Carillion subcontracts then the SPV would have been immediately responsible for continuing the service and finding a replacement subcontractor In all likelihood this would have resulted in serious service disruption However a short period of no or poor service performance is unlikely to have led to a contractor default enabling termination of the contract
The SPV in a PFI cont~act has subcontracts for construction and FM An insolvency of a subcontractor is not a breach of the main contract with HMG There is no right for HMG to terminate as no contractor event of default has occurred It is the SPVs responsibility to replace the subcontractor formiddot no change in price to HMG It is possible to voluntarily terminate the contract with the SPV but this is very expensive and so not appropriate as it fully pays out the lenders and compensates the SPV for future loss of profits In extreme cases the SPV may in due course become insolvent if the cost to complete the project is significantly higher than the original cost
In the case of Carillions failure Carillion was contracted with the SPV to perform certain services ( either construction or FM) The PFI contracts place the responsibility for replacing
5
Carillion with the SPV To the extent that Carillions failure has led to a breach of the SPVs contract with the public sector customer the contracts allow the SPV some time to repair the breach and in addition if the SPV fails then the lenders also have an opportunity to effect a repair If all these attempts fail then the PFI contract can be terminated and there are defined procedures that determine the rights of all parties including the public sector entity holding the contract
B What asse~sment have you made of the impact the collapse of Carillion has had on its subcontractors What level of losses have Carilions subcontractors incurred What impact has the collapse had on smaller contractors who may find it difficult to get support from banks due to their increased credit risk Did the governments attempt to keep Carillion going further increase the financial pressure on its subcontractors as their credit risk increased How many subcontractors will go out ofbusiness
Carillions debts are still being assessed by the Official Receiver but there is no doubt that many subcontractors were owed money by Carillion Those subcontractors that are owed money are being encouraged to register claims as unsecured creditors
The Government has put measures in place to help companies who are impacted by Carillions insolvency including extra support from the banks and time to pay taxes
Lenders have made a fund of pound900m available to support small businesses exposed to Carillions liquidation - and a Government taskforce led by the Secreatry of State for Business Energy and Industrial Strategy has been set up to monitor and advise on mitigating the impacts of Carillions liquidation on construction firms particularly SMEs and those working in the sector middot
The British Business 3ank through its Enterprise Support Scheme will guarantee loans of up to pound1 OOm through its partner banks which can be used to support overdraft borrowing and refinancing of existing debt
Lenders are contacting customers and where appropriate are putting in pl~ce emergency measures including overdraft extensions payment holidays and fee waivers to ensure those facing short term issues can be helped to stay on track
We dispute that government made an attempt to keep CariUion going further This was confirmed by the oral evidence of former Carillion directors to the joint PACACPAC session on 27 February 2018 Contracts which were awarded after Carillions profit warnings were only let to Carillion under the relevant procurement regulations and only where financial standing tests were still met It would be inappropriate for Government to award contracts to suppliers in order to prop them up and consideration of any such factors would be contrary to public procurement law We regret any financial pressure on subcontractors that has flowed from the failure of Carillion but deny that there is any link between Government action and that financial pressure
9 What assessment has Government made ofthe impact ofCarilions failure to honour the prompt payment code for its sub-contractors or whether it has put any of them into financial distress How will Government encourage better compliance with prompt payment and ensure that such codes have credibility (See qq73-79)
6
In 2015 BEIS strengthened the Prompt Payment Code All of the governments Strategic Suppliers have signed up to the Code - promising to pay suppliers promptly and fairly
The Small eusiness Commissioner (SBC) role was created by the Enterprise Act 2016 to tackle late payment and poor payment practices in the private sector and Paul Uppal was appointed in the post in December 2017 The SBC is an independent public body and covers the whole of the United Kingdom
The SBC will provide general advice and information to small businesses on matters such as resolving disputes signpost small businesses to existing support and dispute resolution services through the SBCs website and consider complaints about payment issues between small business suppliers and their larger customers making (non-binding) recommendations on how the parties should resolve their disputes
In the 2017 Manifesto it says Government will be harnessing its buying power to ensure that its big contractors comply with the principles of the Prompt Payment Code We are deveroping the detail of how this will work within the procurement rules
In October 2017 the Government announced that it was looking at how a suppliers payment performance can be considered as part of the procurement process when bidding for public contracts We are working through the detail of how this will operate within the framework of the Public Contracts Regulations and will consult on our proposals soon
10 How many apprentices were employed by Carilions subcontractor companies before its collapse (See qq 88 99) What assessment has been made of the impact on apprenticeships with companies in financial trouble because of Carilions collapse (See q102)
Mr Halton asked how many apprentices within Carillions supply chain would be affected by its insolvency
In total the Carillion Group had over 9000 UK subcontractors Any assessment of the number of apprentices affected would require the identification of these sub-contractors followed by an individual analysis both of the number of apprentices employed by each one and how Carillions liquidation might affect it
During the Committee hearing Gareth Rhys Williams said that a number of apprentices being trained by Carillion Training Services (CTS) were employed by Carillion subcontractors In fact all of the apprentices being trained by CTS arewere employed by Carillion although many were seconded to other firms in the industry which then reimbursed Carillion for their employment costs
The Carillion Group employed andor trained some 1400 1Apprentices at the point of liquidation The Construction Industry Training Board (CITB) has been working to find new employment for these Apprentices including the provision of financial incentives to new employers To date some 753 Apprentices in England have been matched with new
1 This figure excludes Level 1 Learners who have been offered places on alternative courses
7
employers and approximately a further 180 have either completed their courses or decided to pursue other activities
The CITB remains confident of finding potential construction industry employers for all Apprentices who wish to complete their training The CITB has also worked with the Education and Skills Funding Agency to ensure funding is available to support the continued training of these Apprentices and Level 1 Learners
11 What reassurance can you provide about government contingency plans for other large government contractors (See qq116-121)
As John Manzoni said i~ the hearing government has contingency plans for a range of circumstances including possible difficulties faced by other large contractors These plans are proportionate to the criticality of the services supplied and the perceived level ofrisk
12 What will be the net cost for the Health Service of the collapse of Carillionmiddot for example due to legal and other costs associated with changing contracts (See q 130)
The net cost for NHS Trus_ts in changing services contracts under PFI arrangements should be restricted primarily to legal costs in inspecting the form of consent required to enable the SPV to change their subcontractor from Carillion to a new company If the Trusts wish to examine other opportunities such as changes to the main contract these costs may be higher but these are matters for the relevant Trust boards
The situation with regards to the two hospitals under construction is different Followin~ the failure of Carillion under PFI arrangements it is the responsibility of the Project Company (SPV) to find a new construction partner Both SPVs have identified possible candidates These replacement partners have been estimating the cost _to complete the respective hospitals Following these estimates it is up to the SPV to determine with its lenders the most appropriate wa_y to complete and maintain the hospital
13 How did the government consider how the collapse of Carillion could provide an opportunity for Government to exit an expensive PFI contract in respect of the health sector What opportunities still exist to exit such NHS contracts (See also qus 4-7 above)
The immediate priority for Government following the collapse of Carillion was to maintain public services It was important that cleaning porterage and other services continued so that hospitals and other health facilities could continue to operate at full capacity in the middle of winter The opportunities to exit these contracts have been considered alongside other options for the continuation of public services and within the constraints of the contracts which confer rights and place obligations on the counterparties
For the two PFI hospitals in construction the SPV and the lenders have committed the bulk of the investment needed to build the hospital and spent the majority of the money already They have a contractual right to be given time to try and find an alternativecontractor to finish the building work
8
For the hospitals and schools that were built using private finance upfront and where Carillion was providing Facilities Management and maintenance services via an SPV in the days following the liquidation the Official Receiver offered to step in with the same contingency services it was offering to other public services contracts to avoid any risk that public services would be disrupted even for a short time It would have been possible for the OR to stop providing these services and the SPVs are contractually obliged to find an alternative Facilities Management provider This would have taken some time and likely led to some disruption
Without the intervention of the Official Receiver some important public services would likely have suffered at least-a temporary disruption but the SPV would have had time to correct that loss of service and it would not have constituted a breach under the PFI contract such as to justify termination for cause
14 What delays are now expected to the completion of the two hospital construction projects in which Carillion was involved
Midland Metropolitan Hospital
The contract between the Trust and the SPV is still in place which means that the SPV is still contractually obliged to manage the project and find another construction or facilities
middot management services subcontractor who can continue to deliver the building work and subsequent services
The SPV is currently in discussions With the Official Receiver its lenders and with other service and construction companies and the Trust to assess how best to continue delivering these contracts
Royal Liverpool University Hospital
The PFI company at Royal Liverpool is in discussions with the Department for Health and Social Care the Trust and its senior lenders about the prospect of completing construction and delivering the subsequent services middot
The Trust Chief Executive issued a statement on 6 February 2018
In order to get construction started as soon as possible The Hospital Company is working to secure the services of existing sub-contractors and former Carillion construction staff to continue the work This is because they have the best understanding of the work that is required to finish the job
There are highly complex discussions taking place between various parties to get subshycontractors back on site as soon as possible However many of these firms are facing financial difficulties as a result of Carilfions collapse therefore this process will take some time Given this situation we expect a significant delay and it will prove challenging to get the new Royal finished before the end of the year
The Trust is doirig all it can to minimise the delay Our local politicians and others have all been hugely supportive and we will continue to liaise closely with them and the Department of Health We all want the best for our patients and the people of Liverpool and that is to move into our world class new hospital
9
15 What additional costs the official receiver and PWC have charged to which councils related to the transfer ofcontracts previously held with Carillion by those councils and what (a) financial and (b) other support the Government is providing to each of those councils related to such charges (See Qq 12426)
All customers that have received services following 15 January 2018 have been charged an uplift because of additional costs This uplift allows for the extra costs of supplying services resulting from the contraction of Carillions operation and the costs of the liquidation As Carillions fltgtrmer customers migrate to alternative providers the fixed costs at the centre of Carillion - IT back Office services call centres - have to be spread across a smaller number of contracts For public sector customers we anticipate a reconciliation process at some later point when a more accurate estimate of these extra costs has been gained Considerably higher additional costs would have been incurred if services to councils and other public sector customers had been discontinued and these have been avoided middot
In addition during the hearing Mr Jenkin asked about why Government is not getting first refusal on contracts and extracting value (Q131-141) I provide details on thispoint below middot
Where a public sector body is the direct customer of Carillion Government does effectively have first refusal on these contracts In the case of the MoJ (National Offender Management Service) contracts discussed in the Committee hearing Government is taking services back in-house through a Government-owned service company This action will transfer the employment of 1000 former Carillion staff to this service company and transfer a number of subcontracts These subcontractors employ a further 130 peple
This decision is open to any contracting authority holding a direct contract with Carillion In making such a decision the authority has to weigh up a number of considerations such as operational risk and value for money Both of these considerations are impacted by the speed of transition as the Official Receiver (OR) cannot sustain the former Carillion operations indefinitely and also as customers transition away from Carillion the remaining operations have to carry a higher burden of overhead and become more costly to run
The public sector does not have to put in an offer for these contracts Customers rely on the termination provisions in the existing contract with Carillion The OR is facilitating the transfer of former Carillion staff to new employers and to date over 8216 jobs have been preserved in this way
For the majority of relevant Carillion contracts the contract was between Carillion and a Project Company ($PV) which had been set up as part of PFI or PF2 arrangements This SPV then provides services to the public body concerned for example a hospital trust or a school The contract impacted by the liquidation was between Carillion and the SPV and not
between Carillion and the trust or school The risk of providing services has been passed by the PFI contract from the public body to the SPV The SPV must choose exactly how to continue that provision following the liquidation subject to the rights of the lenders The public body concerned does not have the option of taking services ~ack in house as a result of the liquidation as the SPV is not in liquidation
10
The OR has reached agreement with a major supplier to transfer part of Carillions business that fulfilled some of these service contracts with SPVs The supplier has agreed to pay the OR a consideration for this transfer which is subject to the agreement of those SPVs and the consent of the end customer
The OR is bound (by its legal obligations) to make a judgement regarding which course of a_ction returns the most value to the creditors of the liquidation It is also the ORs judgement that this bulk transfer offers the 111ost quick and efficient way to transfer these contracts to new management with the lowest risk of operational disruption to public services
11
Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
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Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
2 For outsourcing to be sustainable the risk of strategic providers failing must be middot managed effectively How does Government assess and manage risk in its relationship with these providers so they are less likely to fail and it is less catastrophic if they do fail Other than close monitoring by Government what consequences do strategic suppliers face when they become higher risk (financially fragile) For example Should the Government require strategic suppliers to maintain a safe level of capital on their balance sheet (For background see qq1-6 to the CampAG)
The risk of strategic suppliers failing is managed at two levels At contract level financial distress clauses usually give contracting authorities rights up to and including termination to protect services in the event of supplier failure In addition Parent Company Guarantees give recourse to properly capitalised entities wh~re as is common the contract is actually held by a subsidiary Performance bonds that can be claimed in the event of default or nonshyperformance are also common on Construction contracts
At a srategic level where a supplier holds contracts across multiple Departments and their revenue from Government exceeds pound1 OOm per annum andor the suppliers is deemed a significant supplier to Government in their sector it is classified as a Strategic Supplier It thus falls within the scope of themiddot Strategic Supplier Risk Management (SSRM) policy This policy contains triggers that allow Government to take action in the event of financial distress These actions include reducing where possible the extent to which the Strategic Supplier is given additional work under the terms of an existing contract (by for example the exercise of any middotoption or change requests) so as to contain the risk to the taxpayer In addition we can demand data and regular interactions with the company depending on the risk rating assigned to the company
Companies of different sizes and in different sectors require different capital structures so there is no such thing as a one-size safe level of capital This safe level is dependant on the nature of business size of business trading conditions and the nature size and duration of contracts This is why each procurement uses appropriate and individually tailored tests of financial standing for that particular contracting situation
3 How does the Government justify the continued use ofan optimism bias adjustment within its Value for Money assessments for publicly funded projects but not for privately financed projects given that it is now clear that private sector contractors are equally capable of over optimism when bidding or forecasting costs (For background see qq1-6 to the CampAG)
What is being delivered through a privately financed project (ie under PFIPF2) is typically a building or asset An optimism bias will be included for Privately financed projects in their value for money analysis until the contract is signed as then the estimated costs of building and maintaining that asset are the responsibility of the vendor We do not need to add contingency or optimism bias to them as they are fixed for us the vendor is responsible for any errors in the estimates
In most of these PFIPF2 arrangements the whole life pricing risk has been transferred to the contractor The optimism bias that might be included in a publicly funded project of similar scope is built into the price bid by the SPV and we expect the SPV to honour that price
3
4 Has any of the pound150 million Government funding to support the work of the official receiver been used to ensure ongoing short-term delivery of SPVIPFI contracts If somiddot what proportion ofthe pound150 million has been used in this way Is pound150 million your best internal estimate or will the final amount needed to support the work of the official receiver end up being much higher
The Cabinet Office is to provide pound150m of funding to the Official Receiver in respect of Carillion in liquidation in the current financial year This f_unding was identified in Supplementary Estimates laid before Parliament on 7 February 2018
Some of the funding will be used by the Official Receiver to provide working capital to the company in liquidation This allows former Carillion employees and the Carillion supply chain to continue to supply services where the end customer is a public sector entity In the case of SPVPFI arrangements these services are supplied under contract to the SPV which then in turn is contracted to the NHS Trust or school Any sums spent on such delivery will be recovered from the SPV in question It is not possible to estimate at this stage what proportion of the pound150m will be used to ensure the ongoing short term delivery of SPVPFI contracts
In addition to this working capital the pound150m is intended to cover the cost~ of the liquidation which include the responsibility for making Carillion construction sites safe and secure irrecoverable VAT due to change of status of Carillion to a company in liquidation some back office costs relating to the on-going operation of the companymiddotand the fees of the Official Receiver Special Managers and their Professional Advisers The Official Receiver will be looking to raise funds from recovering trade debts owed to Carillion settlement of claims owed to Carillion and from the sale of assets These funds will be applied in line with statutory duties of the Official Receiver and used to offset funding provided by the Cabinet Office to the Official Receiver in respect to Carillion in liquidation Any unused funding wm be returned to the Cabinet Office
5 Do the assets which are under the control of the Official Receiver (OR) and are to be sold include SPVIPFI contracts (See q53)
Carillion was involved in a number of different PFI contracts Carillion normally was an equity shareholder in the SPV during the construction phase of a project then became a subcontractor to th~ SPV to provide ongoing services and subsequently sold its equity holding
The contracts which can potentially be sold by the Official Receiver include a number of PFlshyrelated service contracts These contracts were between a Carillion entity and the SPV and the SPV in turn held the main PFI contract with the public body The SPV has the right to terminate these contracts upon liquidation Some of these contracts can be sold as assets as they have a long time to run but this is subject to the consent of the SPV
Carillion did have partial equity holdings in some of the PFls where construction was still in process such as the Midland Metropolitan Hospital in Smethwick the Royal Liverpool University Hospital and the Aberdeen Western Peripheral Route Carillion was one of several shareholders in each SPV The Official Receiver can sell the equity shareholding to the other shareholders (or potentially to a third party) if the equity has any value
4
6 Under insolvency legislation when selling company assets the Official Receiver is under a statutory duty to achieve the best price he can for the benefit of the creditors as a whole What guidance (if any) are you giving the OR on what would be an acceptable level of difference between the original contract value and the price achieved in a liquidation situation to ensure best value for the taxpayer in selling of Carilions assets (See q62 qq131-134)
HM Government is not giving guidance to the Official Receiver on the acceptable value of contracts The Officials Receiver is a court appointed official and his duties are set out in statute as noted above
The question implies a misunderstanding hoVl(ever There are different meanings of the word value at play here The original contract value (as published in the OJEU or on Contracts Finder) is the anticipated annual price paid by the customer (the contracting authority) for the services multiplied by the maximum number of years the contract could runs for whereas the price achieved in a liquidation situation is the value attributed by a replacement supplier to the cash flows and profit achievable if they were to take on and complete the contract at the original price
This is quite a complicated calculation and involves for example the perceived risk of the contract the match with the replacement suppliers current business and alternative uses of that suppliers capital For example a contract with a contract value of pound1 Orn per year for 5 years ie pound50m which is making 5 profit on sales will yield a profit of pound25m over that term If a potential buyer feels there is no risk in that contract and it has 2 years yet to run they might bid up to pound125m for it but that purchase cost would wipe out all the anticipated contract profit so realistically they would probably only offer pound03m to pound06m for it as they also have to make a return on that pound03m middot
7 What are the implications of government stepping into private sector SPVs (See q 135) Is there something in the contractual structures of the SPV model that mean SPVIPFI contracts could not be taken over by the Government (See q141)
HMG did not step in to (terminate and take over) the private sector SPVs Had the Officials Receiver not temporarily covered the staff and overheads cost of the Carillion subcontracts then the SPV would have been immediately responsible for continuing the service and finding a replacement subcontractor In all likelihood this would have resulted in serious service disruption However a short period of no or poor service performance is unlikely to have led to a contractor default enabling termination of the contract
The SPV in a PFI cont~act has subcontracts for construction and FM An insolvency of a subcontractor is not a breach of the main contract with HMG There is no right for HMG to terminate as no contractor event of default has occurred It is the SPVs responsibility to replace the subcontractor formiddot no change in price to HMG It is possible to voluntarily terminate the contract with the SPV but this is very expensive and so not appropriate as it fully pays out the lenders and compensates the SPV for future loss of profits In extreme cases the SPV may in due course become insolvent if the cost to complete the project is significantly higher than the original cost
In the case of Carillions failure Carillion was contracted with the SPV to perform certain services ( either construction or FM) The PFI contracts place the responsibility for replacing
5
Carillion with the SPV To the extent that Carillions failure has led to a breach of the SPVs contract with the public sector customer the contracts allow the SPV some time to repair the breach and in addition if the SPV fails then the lenders also have an opportunity to effect a repair If all these attempts fail then the PFI contract can be terminated and there are defined procedures that determine the rights of all parties including the public sector entity holding the contract
B What asse~sment have you made of the impact the collapse of Carillion has had on its subcontractors What level of losses have Carilions subcontractors incurred What impact has the collapse had on smaller contractors who may find it difficult to get support from banks due to their increased credit risk Did the governments attempt to keep Carillion going further increase the financial pressure on its subcontractors as their credit risk increased How many subcontractors will go out ofbusiness
Carillions debts are still being assessed by the Official Receiver but there is no doubt that many subcontractors were owed money by Carillion Those subcontractors that are owed money are being encouraged to register claims as unsecured creditors
The Government has put measures in place to help companies who are impacted by Carillions insolvency including extra support from the banks and time to pay taxes
Lenders have made a fund of pound900m available to support small businesses exposed to Carillions liquidation - and a Government taskforce led by the Secreatry of State for Business Energy and Industrial Strategy has been set up to monitor and advise on mitigating the impacts of Carillions liquidation on construction firms particularly SMEs and those working in the sector middot
The British Business 3ank through its Enterprise Support Scheme will guarantee loans of up to pound1 OOm through its partner banks which can be used to support overdraft borrowing and refinancing of existing debt
Lenders are contacting customers and where appropriate are putting in pl~ce emergency measures including overdraft extensions payment holidays and fee waivers to ensure those facing short term issues can be helped to stay on track
We dispute that government made an attempt to keep CariUion going further This was confirmed by the oral evidence of former Carillion directors to the joint PACACPAC session on 27 February 2018 Contracts which were awarded after Carillions profit warnings were only let to Carillion under the relevant procurement regulations and only where financial standing tests were still met It would be inappropriate for Government to award contracts to suppliers in order to prop them up and consideration of any such factors would be contrary to public procurement law We regret any financial pressure on subcontractors that has flowed from the failure of Carillion but deny that there is any link between Government action and that financial pressure
9 What assessment has Government made ofthe impact ofCarilions failure to honour the prompt payment code for its sub-contractors or whether it has put any of them into financial distress How will Government encourage better compliance with prompt payment and ensure that such codes have credibility (See qq73-79)
6
In 2015 BEIS strengthened the Prompt Payment Code All of the governments Strategic Suppliers have signed up to the Code - promising to pay suppliers promptly and fairly
The Small eusiness Commissioner (SBC) role was created by the Enterprise Act 2016 to tackle late payment and poor payment practices in the private sector and Paul Uppal was appointed in the post in December 2017 The SBC is an independent public body and covers the whole of the United Kingdom
The SBC will provide general advice and information to small businesses on matters such as resolving disputes signpost small businesses to existing support and dispute resolution services through the SBCs website and consider complaints about payment issues between small business suppliers and their larger customers making (non-binding) recommendations on how the parties should resolve their disputes
In the 2017 Manifesto it says Government will be harnessing its buying power to ensure that its big contractors comply with the principles of the Prompt Payment Code We are deveroping the detail of how this will work within the procurement rules
In October 2017 the Government announced that it was looking at how a suppliers payment performance can be considered as part of the procurement process when bidding for public contracts We are working through the detail of how this will operate within the framework of the Public Contracts Regulations and will consult on our proposals soon
10 How many apprentices were employed by Carilions subcontractor companies before its collapse (See qq 88 99) What assessment has been made of the impact on apprenticeships with companies in financial trouble because of Carilions collapse (See q102)
Mr Halton asked how many apprentices within Carillions supply chain would be affected by its insolvency
In total the Carillion Group had over 9000 UK subcontractors Any assessment of the number of apprentices affected would require the identification of these sub-contractors followed by an individual analysis both of the number of apprentices employed by each one and how Carillions liquidation might affect it
During the Committee hearing Gareth Rhys Williams said that a number of apprentices being trained by Carillion Training Services (CTS) were employed by Carillion subcontractors In fact all of the apprentices being trained by CTS arewere employed by Carillion although many were seconded to other firms in the industry which then reimbursed Carillion for their employment costs
The Carillion Group employed andor trained some 1400 1Apprentices at the point of liquidation The Construction Industry Training Board (CITB) has been working to find new employment for these Apprentices including the provision of financial incentives to new employers To date some 753 Apprentices in England have been matched with new
1 This figure excludes Level 1 Learners who have been offered places on alternative courses
7
employers and approximately a further 180 have either completed their courses or decided to pursue other activities
The CITB remains confident of finding potential construction industry employers for all Apprentices who wish to complete their training The CITB has also worked with the Education and Skills Funding Agency to ensure funding is available to support the continued training of these Apprentices and Level 1 Learners
11 What reassurance can you provide about government contingency plans for other large government contractors (See qq116-121)
As John Manzoni said i~ the hearing government has contingency plans for a range of circumstances including possible difficulties faced by other large contractors These plans are proportionate to the criticality of the services supplied and the perceived level ofrisk
12 What will be the net cost for the Health Service of the collapse of Carillionmiddot for example due to legal and other costs associated with changing contracts (See q 130)
The net cost for NHS Trus_ts in changing services contracts under PFI arrangements should be restricted primarily to legal costs in inspecting the form of consent required to enable the SPV to change their subcontractor from Carillion to a new company If the Trusts wish to examine other opportunities such as changes to the main contract these costs may be higher but these are matters for the relevant Trust boards
The situation with regards to the two hospitals under construction is different Followin~ the failure of Carillion under PFI arrangements it is the responsibility of the Project Company (SPV) to find a new construction partner Both SPVs have identified possible candidates These replacement partners have been estimating the cost _to complete the respective hospitals Following these estimates it is up to the SPV to determine with its lenders the most appropriate wa_y to complete and maintain the hospital
13 How did the government consider how the collapse of Carillion could provide an opportunity for Government to exit an expensive PFI contract in respect of the health sector What opportunities still exist to exit such NHS contracts (See also qus 4-7 above)
The immediate priority for Government following the collapse of Carillion was to maintain public services It was important that cleaning porterage and other services continued so that hospitals and other health facilities could continue to operate at full capacity in the middle of winter The opportunities to exit these contracts have been considered alongside other options for the continuation of public services and within the constraints of the contracts which confer rights and place obligations on the counterparties
For the two PFI hospitals in construction the SPV and the lenders have committed the bulk of the investment needed to build the hospital and spent the majority of the money already They have a contractual right to be given time to try and find an alternativecontractor to finish the building work
8
For the hospitals and schools that were built using private finance upfront and where Carillion was providing Facilities Management and maintenance services via an SPV in the days following the liquidation the Official Receiver offered to step in with the same contingency services it was offering to other public services contracts to avoid any risk that public services would be disrupted even for a short time It would have been possible for the OR to stop providing these services and the SPVs are contractually obliged to find an alternative Facilities Management provider This would have taken some time and likely led to some disruption
Without the intervention of the Official Receiver some important public services would likely have suffered at least-a temporary disruption but the SPV would have had time to correct that loss of service and it would not have constituted a breach under the PFI contract such as to justify termination for cause
14 What delays are now expected to the completion of the two hospital construction projects in which Carillion was involved
Midland Metropolitan Hospital
The contract between the Trust and the SPV is still in place which means that the SPV is still contractually obliged to manage the project and find another construction or facilities
middot management services subcontractor who can continue to deliver the building work and subsequent services
The SPV is currently in discussions With the Official Receiver its lenders and with other service and construction companies and the Trust to assess how best to continue delivering these contracts
Royal Liverpool University Hospital
The PFI company at Royal Liverpool is in discussions with the Department for Health and Social Care the Trust and its senior lenders about the prospect of completing construction and delivering the subsequent services middot
The Trust Chief Executive issued a statement on 6 February 2018
In order to get construction started as soon as possible The Hospital Company is working to secure the services of existing sub-contractors and former Carillion construction staff to continue the work This is because they have the best understanding of the work that is required to finish the job
There are highly complex discussions taking place between various parties to get subshycontractors back on site as soon as possible However many of these firms are facing financial difficulties as a result of Carilfions collapse therefore this process will take some time Given this situation we expect a significant delay and it will prove challenging to get the new Royal finished before the end of the year
The Trust is doirig all it can to minimise the delay Our local politicians and others have all been hugely supportive and we will continue to liaise closely with them and the Department of Health We all want the best for our patients and the people of Liverpool and that is to move into our world class new hospital
9
15 What additional costs the official receiver and PWC have charged to which councils related to the transfer ofcontracts previously held with Carillion by those councils and what (a) financial and (b) other support the Government is providing to each of those councils related to such charges (See Qq 12426)
All customers that have received services following 15 January 2018 have been charged an uplift because of additional costs This uplift allows for the extra costs of supplying services resulting from the contraction of Carillions operation and the costs of the liquidation As Carillions fltgtrmer customers migrate to alternative providers the fixed costs at the centre of Carillion - IT back Office services call centres - have to be spread across a smaller number of contracts For public sector customers we anticipate a reconciliation process at some later point when a more accurate estimate of these extra costs has been gained Considerably higher additional costs would have been incurred if services to councils and other public sector customers had been discontinued and these have been avoided middot
In addition during the hearing Mr Jenkin asked about why Government is not getting first refusal on contracts and extracting value (Q131-141) I provide details on thispoint below middot
Where a public sector body is the direct customer of Carillion Government does effectively have first refusal on these contracts In the case of the MoJ (National Offender Management Service) contracts discussed in the Committee hearing Government is taking services back in-house through a Government-owned service company This action will transfer the employment of 1000 former Carillion staff to this service company and transfer a number of subcontracts These subcontractors employ a further 130 peple
This decision is open to any contracting authority holding a direct contract with Carillion In making such a decision the authority has to weigh up a number of considerations such as operational risk and value for money Both of these considerations are impacted by the speed of transition as the Official Receiver (OR) cannot sustain the former Carillion operations indefinitely and also as customers transition away from Carillion the remaining operations have to carry a higher burden of overhead and become more costly to run
The public sector does not have to put in an offer for these contracts Customers rely on the termination provisions in the existing contract with Carillion The OR is facilitating the transfer of former Carillion staff to new employers and to date over 8216 jobs have been preserved in this way
For the majority of relevant Carillion contracts the contract was between Carillion and a Project Company ($PV) which had been set up as part of PFI or PF2 arrangements This SPV then provides services to the public body concerned for example a hospital trust or a school The contract impacted by the liquidation was between Carillion and the SPV and not
between Carillion and the trust or school The risk of providing services has been passed by the PFI contract from the public body to the SPV The SPV must choose exactly how to continue that provision following the liquidation subject to the rights of the lenders The public body concerned does not have the option of taking services ~ack in house as a result of the liquidation as the SPV is not in liquidation
10
The OR has reached agreement with a major supplier to transfer part of Carillions business that fulfilled some of these service contracts with SPVs The supplier has agreed to pay the OR a consideration for this transfer which is subject to the agreement of those SPVs and the consent of the end customer
The OR is bound (by its legal obligations) to make a judgement regarding which course of a_ction returns the most value to the creditors of the liquidation It is also the ORs judgement that this bulk transfer offers the 111ost quick and efficient way to transfer these contracts to new management with the lowest risk of operational disruption to public services
11
Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
12
Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
4 Has any of the pound150 million Government funding to support the work of the official receiver been used to ensure ongoing short-term delivery of SPVIPFI contracts If somiddot what proportion ofthe pound150 million has been used in this way Is pound150 million your best internal estimate or will the final amount needed to support the work of the official receiver end up being much higher
The Cabinet Office is to provide pound150m of funding to the Official Receiver in respect of Carillion in liquidation in the current financial year This f_unding was identified in Supplementary Estimates laid before Parliament on 7 February 2018
Some of the funding will be used by the Official Receiver to provide working capital to the company in liquidation This allows former Carillion employees and the Carillion supply chain to continue to supply services where the end customer is a public sector entity In the case of SPVPFI arrangements these services are supplied under contract to the SPV which then in turn is contracted to the NHS Trust or school Any sums spent on such delivery will be recovered from the SPV in question It is not possible to estimate at this stage what proportion of the pound150m will be used to ensure the ongoing short term delivery of SPVPFI contracts
In addition to this working capital the pound150m is intended to cover the cost~ of the liquidation which include the responsibility for making Carillion construction sites safe and secure irrecoverable VAT due to change of status of Carillion to a company in liquidation some back office costs relating to the on-going operation of the companymiddotand the fees of the Official Receiver Special Managers and their Professional Advisers The Official Receiver will be looking to raise funds from recovering trade debts owed to Carillion settlement of claims owed to Carillion and from the sale of assets These funds will be applied in line with statutory duties of the Official Receiver and used to offset funding provided by the Cabinet Office to the Official Receiver in respect to Carillion in liquidation Any unused funding wm be returned to the Cabinet Office
5 Do the assets which are under the control of the Official Receiver (OR) and are to be sold include SPVIPFI contracts (See q53)
Carillion was involved in a number of different PFI contracts Carillion normally was an equity shareholder in the SPV during the construction phase of a project then became a subcontractor to th~ SPV to provide ongoing services and subsequently sold its equity holding
The contracts which can potentially be sold by the Official Receiver include a number of PFlshyrelated service contracts These contracts were between a Carillion entity and the SPV and the SPV in turn held the main PFI contract with the public body The SPV has the right to terminate these contracts upon liquidation Some of these contracts can be sold as assets as they have a long time to run but this is subject to the consent of the SPV
Carillion did have partial equity holdings in some of the PFls where construction was still in process such as the Midland Metropolitan Hospital in Smethwick the Royal Liverpool University Hospital and the Aberdeen Western Peripheral Route Carillion was one of several shareholders in each SPV The Official Receiver can sell the equity shareholding to the other shareholders (or potentially to a third party) if the equity has any value
4
6 Under insolvency legislation when selling company assets the Official Receiver is under a statutory duty to achieve the best price he can for the benefit of the creditors as a whole What guidance (if any) are you giving the OR on what would be an acceptable level of difference between the original contract value and the price achieved in a liquidation situation to ensure best value for the taxpayer in selling of Carilions assets (See q62 qq131-134)
HM Government is not giving guidance to the Official Receiver on the acceptable value of contracts The Officials Receiver is a court appointed official and his duties are set out in statute as noted above
The question implies a misunderstanding hoVl(ever There are different meanings of the word value at play here The original contract value (as published in the OJEU or on Contracts Finder) is the anticipated annual price paid by the customer (the contracting authority) for the services multiplied by the maximum number of years the contract could runs for whereas the price achieved in a liquidation situation is the value attributed by a replacement supplier to the cash flows and profit achievable if they were to take on and complete the contract at the original price
This is quite a complicated calculation and involves for example the perceived risk of the contract the match with the replacement suppliers current business and alternative uses of that suppliers capital For example a contract with a contract value of pound1 Orn per year for 5 years ie pound50m which is making 5 profit on sales will yield a profit of pound25m over that term If a potential buyer feels there is no risk in that contract and it has 2 years yet to run they might bid up to pound125m for it but that purchase cost would wipe out all the anticipated contract profit so realistically they would probably only offer pound03m to pound06m for it as they also have to make a return on that pound03m middot
7 What are the implications of government stepping into private sector SPVs (See q 135) Is there something in the contractual structures of the SPV model that mean SPVIPFI contracts could not be taken over by the Government (See q141)
HMG did not step in to (terminate and take over) the private sector SPVs Had the Officials Receiver not temporarily covered the staff and overheads cost of the Carillion subcontracts then the SPV would have been immediately responsible for continuing the service and finding a replacement subcontractor In all likelihood this would have resulted in serious service disruption However a short period of no or poor service performance is unlikely to have led to a contractor default enabling termination of the contract
The SPV in a PFI cont~act has subcontracts for construction and FM An insolvency of a subcontractor is not a breach of the main contract with HMG There is no right for HMG to terminate as no contractor event of default has occurred It is the SPVs responsibility to replace the subcontractor formiddot no change in price to HMG It is possible to voluntarily terminate the contract with the SPV but this is very expensive and so not appropriate as it fully pays out the lenders and compensates the SPV for future loss of profits In extreme cases the SPV may in due course become insolvent if the cost to complete the project is significantly higher than the original cost
In the case of Carillions failure Carillion was contracted with the SPV to perform certain services ( either construction or FM) The PFI contracts place the responsibility for replacing
5
Carillion with the SPV To the extent that Carillions failure has led to a breach of the SPVs contract with the public sector customer the contracts allow the SPV some time to repair the breach and in addition if the SPV fails then the lenders also have an opportunity to effect a repair If all these attempts fail then the PFI contract can be terminated and there are defined procedures that determine the rights of all parties including the public sector entity holding the contract
B What asse~sment have you made of the impact the collapse of Carillion has had on its subcontractors What level of losses have Carilions subcontractors incurred What impact has the collapse had on smaller contractors who may find it difficult to get support from banks due to their increased credit risk Did the governments attempt to keep Carillion going further increase the financial pressure on its subcontractors as their credit risk increased How many subcontractors will go out ofbusiness
Carillions debts are still being assessed by the Official Receiver but there is no doubt that many subcontractors were owed money by Carillion Those subcontractors that are owed money are being encouraged to register claims as unsecured creditors
The Government has put measures in place to help companies who are impacted by Carillions insolvency including extra support from the banks and time to pay taxes
Lenders have made a fund of pound900m available to support small businesses exposed to Carillions liquidation - and a Government taskforce led by the Secreatry of State for Business Energy and Industrial Strategy has been set up to monitor and advise on mitigating the impacts of Carillions liquidation on construction firms particularly SMEs and those working in the sector middot
The British Business 3ank through its Enterprise Support Scheme will guarantee loans of up to pound1 OOm through its partner banks which can be used to support overdraft borrowing and refinancing of existing debt
Lenders are contacting customers and where appropriate are putting in pl~ce emergency measures including overdraft extensions payment holidays and fee waivers to ensure those facing short term issues can be helped to stay on track
We dispute that government made an attempt to keep CariUion going further This was confirmed by the oral evidence of former Carillion directors to the joint PACACPAC session on 27 February 2018 Contracts which were awarded after Carillions profit warnings were only let to Carillion under the relevant procurement regulations and only where financial standing tests were still met It would be inappropriate for Government to award contracts to suppliers in order to prop them up and consideration of any such factors would be contrary to public procurement law We regret any financial pressure on subcontractors that has flowed from the failure of Carillion but deny that there is any link between Government action and that financial pressure
9 What assessment has Government made ofthe impact ofCarilions failure to honour the prompt payment code for its sub-contractors or whether it has put any of them into financial distress How will Government encourage better compliance with prompt payment and ensure that such codes have credibility (See qq73-79)
6
In 2015 BEIS strengthened the Prompt Payment Code All of the governments Strategic Suppliers have signed up to the Code - promising to pay suppliers promptly and fairly
The Small eusiness Commissioner (SBC) role was created by the Enterprise Act 2016 to tackle late payment and poor payment practices in the private sector and Paul Uppal was appointed in the post in December 2017 The SBC is an independent public body and covers the whole of the United Kingdom
The SBC will provide general advice and information to small businesses on matters such as resolving disputes signpost small businesses to existing support and dispute resolution services through the SBCs website and consider complaints about payment issues between small business suppliers and their larger customers making (non-binding) recommendations on how the parties should resolve their disputes
In the 2017 Manifesto it says Government will be harnessing its buying power to ensure that its big contractors comply with the principles of the Prompt Payment Code We are deveroping the detail of how this will work within the procurement rules
In October 2017 the Government announced that it was looking at how a suppliers payment performance can be considered as part of the procurement process when bidding for public contracts We are working through the detail of how this will operate within the framework of the Public Contracts Regulations and will consult on our proposals soon
10 How many apprentices were employed by Carilions subcontractor companies before its collapse (See qq 88 99) What assessment has been made of the impact on apprenticeships with companies in financial trouble because of Carilions collapse (See q102)
Mr Halton asked how many apprentices within Carillions supply chain would be affected by its insolvency
In total the Carillion Group had over 9000 UK subcontractors Any assessment of the number of apprentices affected would require the identification of these sub-contractors followed by an individual analysis both of the number of apprentices employed by each one and how Carillions liquidation might affect it
During the Committee hearing Gareth Rhys Williams said that a number of apprentices being trained by Carillion Training Services (CTS) were employed by Carillion subcontractors In fact all of the apprentices being trained by CTS arewere employed by Carillion although many were seconded to other firms in the industry which then reimbursed Carillion for their employment costs
The Carillion Group employed andor trained some 1400 1Apprentices at the point of liquidation The Construction Industry Training Board (CITB) has been working to find new employment for these Apprentices including the provision of financial incentives to new employers To date some 753 Apprentices in England have been matched with new
1 This figure excludes Level 1 Learners who have been offered places on alternative courses
7
employers and approximately a further 180 have either completed their courses or decided to pursue other activities
The CITB remains confident of finding potential construction industry employers for all Apprentices who wish to complete their training The CITB has also worked with the Education and Skills Funding Agency to ensure funding is available to support the continued training of these Apprentices and Level 1 Learners
11 What reassurance can you provide about government contingency plans for other large government contractors (See qq116-121)
As John Manzoni said i~ the hearing government has contingency plans for a range of circumstances including possible difficulties faced by other large contractors These plans are proportionate to the criticality of the services supplied and the perceived level ofrisk
12 What will be the net cost for the Health Service of the collapse of Carillionmiddot for example due to legal and other costs associated with changing contracts (See q 130)
The net cost for NHS Trus_ts in changing services contracts under PFI arrangements should be restricted primarily to legal costs in inspecting the form of consent required to enable the SPV to change their subcontractor from Carillion to a new company If the Trusts wish to examine other opportunities such as changes to the main contract these costs may be higher but these are matters for the relevant Trust boards
The situation with regards to the two hospitals under construction is different Followin~ the failure of Carillion under PFI arrangements it is the responsibility of the Project Company (SPV) to find a new construction partner Both SPVs have identified possible candidates These replacement partners have been estimating the cost _to complete the respective hospitals Following these estimates it is up to the SPV to determine with its lenders the most appropriate wa_y to complete and maintain the hospital
13 How did the government consider how the collapse of Carillion could provide an opportunity for Government to exit an expensive PFI contract in respect of the health sector What opportunities still exist to exit such NHS contracts (See also qus 4-7 above)
The immediate priority for Government following the collapse of Carillion was to maintain public services It was important that cleaning porterage and other services continued so that hospitals and other health facilities could continue to operate at full capacity in the middle of winter The opportunities to exit these contracts have been considered alongside other options for the continuation of public services and within the constraints of the contracts which confer rights and place obligations on the counterparties
For the two PFI hospitals in construction the SPV and the lenders have committed the bulk of the investment needed to build the hospital and spent the majority of the money already They have a contractual right to be given time to try and find an alternativecontractor to finish the building work
8
For the hospitals and schools that were built using private finance upfront and where Carillion was providing Facilities Management and maintenance services via an SPV in the days following the liquidation the Official Receiver offered to step in with the same contingency services it was offering to other public services contracts to avoid any risk that public services would be disrupted even for a short time It would have been possible for the OR to stop providing these services and the SPVs are contractually obliged to find an alternative Facilities Management provider This would have taken some time and likely led to some disruption
Without the intervention of the Official Receiver some important public services would likely have suffered at least-a temporary disruption but the SPV would have had time to correct that loss of service and it would not have constituted a breach under the PFI contract such as to justify termination for cause
14 What delays are now expected to the completion of the two hospital construction projects in which Carillion was involved
Midland Metropolitan Hospital
The contract between the Trust and the SPV is still in place which means that the SPV is still contractually obliged to manage the project and find another construction or facilities
middot management services subcontractor who can continue to deliver the building work and subsequent services
The SPV is currently in discussions With the Official Receiver its lenders and with other service and construction companies and the Trust to assess how best to continue delivering these contracts
Royal Liverpool University Hospital
The PFI company at Royal Liverpool is in discussions with the Department for Health and Social Care the Trust and its senior lenders about the prospect of completing construction and delivering the subsequent services middot
The Trust Chief Executive issued a statement on 6 February 2018
In order to get construction started as soon as possible The Hospital Company is working to secure the services of existing sub-contractors and former Carillion construction staff to continue the work This is because they have the best understanding of the work that is required to finish the job
There are highly complex discussions taking place between various parties to get subshycontractors back on site as soon as possible However many of these firms are facing financial difficulties as a result of Carilfions collapse therefore this process will take some time Given this situation we expect a significant delay and it will prove challenging to get the new Royal finished before the end of the year
The Trust is doirig all it can to minimise the delay Our local politicians and others have all been hugely supportive and we will continue to liaise closely with them and the Department of Health We all want the best for our patients and the people of Liverpool and that is to move into our world class new hospital
9
15 What additional costs the official receiver and PWC have charged to which councils related to the transfer ofcontracts previously held with Carillion by those councils and what (a) financial and (b) other support the Government is providing to each of those councils related to such charges (See Qq 12426)
All customers that have received services following 15 January 2018 have been charged an uplift because of additional costs This uplift allows for the extra costs of supplying services resulting from the contraction of Carillions operation and the costs of the liquidation As Carillions fltgtrmer customers migrate to alternative providers the fixed costs at the centre of Carillion - IT back Office services call centres - have to be spread across a smaller number of contracts For public sector customers we anticipate a reconciliation process at some later point when a more accurate estimate of these extra costs has been gained Considerably higher additional costs would have been incurred if services to councils and other public sector customers had been discontinued and these have been avoided middot
In addition during the hearing Mr Jenkin asked about why Government is not getting first refusal on contracts and extracting value (Q131-141) I provide details on thispoint below middot
Where a public sector body is the direct customer of Carillion Government does effectively have first refusal on these contracts In the case of the MoJ (National Offender Management Service) contracts discussed in the Committee hearing Government is taking services back in-house through a Government-owned service company This action will transfer the employment of 1000 former Carillion staff to this service company and transfer a number of subcontracts These subcontractors employ a further 130 peple
This decision is open to any contracting authority holding a direct contract with Carillion In making such a decision the authority has to weigh up a number of considerations such as operational risk and value for money Both of these considerations are impacted by the speed of transition as the Official Receiver (OR) cannot sustain the former Carillion operations indefinitely and also as customers transition away from Carillion the remaining operations have to carry a higher burden of overhead and become more costly to run
The public sector does not have to put in an offer for these contracts Customers rely on the termination provisions in the existing contract with Carillion The OR is facilitating the transfer of former Carillion staff to new employers and to date over 8216 jobs have been preserved in this way
For the majority of relevant Carillion contracts the contract was between Carillion and a Project Company ($PV) which had been set up as part of PFI or PF2 arrangements This SPV then provides services to the public body concerned for example a hospital trust or a school The contract impacted by the liquidation was between Carillion and the SPV and not
between Carillion and the trust or school The risk of providing services has been passed by the PFI contract from the public body to the SPV The SPV must choose exactly how to continue that provision following the liquidation subject to the rights of the lenders The public body concerned does not have the option of taking services ~ack in house as a result of the liquidation as the SPV is not in liquidation
10
The OR has reached agreement with a major supplier to transfer part of Carillions business that fulfilled some of these service contracts with SPVs The supplier has agreed to pay the OR a consideration for this transfer which is subject to the agreement of those SPVs and the consent of the end customer
The OR is bound (by its legal obligations) to make a judgement regarding which course of a_ction returns the most value to the creditors of the liquidation It is also the ORs judgement that this bulk transfer offers the 111ost quick and efficient way to transfer these contracts to new management with the lowest risk of operational disruption to public services
11
Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
12
Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
6 Under insolvency legislation when selling company assets the Official Receiver is under a statutory duty to achieve the best price he can for the benefit of the creditors as a whole What guidance (if any) are you giving the OR on what would be an acceptable level of difference between the original contract value and the price achieved in a liquidation situation to ensure best value for the taxpayer in selling of Carilions assets (See q62 qq131-134)
HM Government is not giving guidance to the Official Receiver on the acceptable value of contracts The Officials Receiver is a court appointed official and his duties are set out in statute as noted above
The question implies a misunderstanding hoVl(ever There are different meanings of the word value at play here The original contract value (as published in the OJEU or on Contracts Finder) is the anticipated annual price paid by the customer (the contracting authority) for the services multiplied by the maximum number of years the contract could runs for whereas the price achieved in a liquidation situation is the value attributed by a replacement supplier to the cash flows and profit achievable if they were to take on and complete the contract at the original price
This is quite a complicated calculation and involves for example the perceived risk of the contract the match with the replacement suppliers current business and alternative uses of that suppliers capital For example a contract with a contract value of pound1 Orn per year for 5 years ie pound50m which is making 5 profit on sales will yield a profit of pound25m over that term If a potential buyer feels there is no risk in that contract and it has 2 years yet to run they might bid up to pound125m for it but that purchase cost would wipe out all the anticipated contract profit so realistically they would probably only offer pound03m to pound06m for it as they also have to make a return on that pound03m middot
7 What are the implications of government stepping into private sector SPVs (See q 135) Is there something in the contractual structures of the SPV model that mean SPVIPFI contracts could not be taken over by the Government (See q141)
HMG did not step in to (terminate and take over) the private sector SPVs Had the Officials Receiver not temporarily covered the staff and overheads cost of the Carillion subcontracts then the SPV would have been immediately responsible for continuing the service and finding a replacement subcontractor In all likelihood this would have resulted in serious service disruption However a short period of no or poor service performance is unlikely to have led to a contractor default enabling termination of the contract
The SPV in a PFI cont~act has subcontracts for construction and FM An insolvency of a subcontractor is not a breach of the main contract with HMG There is no right for HMG to terminate as no contractor event of default has occurred It is the SPVs responsibility to replace the subcontractor formiddot no change in price to HMG It is possible to voluntarily terminate the contract with the SPV but this is very expensive and so not appropriate as it fully pays out the lenders and compensates the SPV for future loss of profits In extreme cases the SPV may in due course become insolvent if the cost to complete the project is significantly higher than the original cost
In the case of Carillions failure Carillion was contracted with the SPV to perform certain services ( either construction or FM) The PFI contracts place the responsibility for replacing
5
Carillion with the SPV To the extent that Carillions failure has led to a breach of the SPVs contract with the public sector customer the contracts allow the SPV some time to repair the breach and in addition if the SPV fails then the lenders also have an opportunity to effect a repair If all these attempts fail then the PFI contract can be terminated and there are defined procedures that determine the rights of all parties including the public sector entity holding the contract
B What asse~sment have you made of the impact the collapse of Carillion has had on its subcontractors What level of losses have Carilions subcontractors incurred What impact has the collapse had on smaller contractors who may find it difficult to get support from banks due to their increased credit risk Did the governments attempt to keep Carillion going further increase the financial pressure on its subcontractors as their credit risk increased How many subcontractors will go out ofbusiness
Carillions debts are still being assessed by the Official Receiver but there is no doubt that many subcontractors were owed money by Carillion Those subcontractors that are owed money are being encouraged to register claims as unsecured creditors
The Government has put measures in place to help companies who are impacted by Carillions insolvency including extra support from the banks and time to pay taxes
Lenders have made a fund of pound900m available to support small businesses exposed to Carillions liquidation - and a Government taskforce led by the Secreatry of State for Business Energy and Industrial Strategy has been set up to monitor and advise on mitigating the impacts of Carillions liquidation on construction firms particularly SMEs and those working in the sector middot
The British Business 3ank through its Enterprise Support Scheme will guarantee loans of up to pound1 OOm through its partner banks which can be used to support overdraft borrowing and refinancing of existing debt
Lenders are contacting customers and where appropriate are putting in pl~ce emergency measures including overdraft extensions payment holidays and fee waivers to ensure those facing short term issues can be helped to stay on track
We dispute that government made an attempt to keep CariUion going further This was confirmed by the oral evidence of former Carillion directors to the joint PACACPAC session on 27 February 2018 Contracts which were awarded after Carillions profit warnings were only let to Carillion under the relevant procurement regulations and only where financial standing tests were still met It would be inappropriate for Government to award contracts to suppliers in order to prop them up and consideration of any such factors would be contrary to public procurement law We regret any financial pressure on subcontractors that has flowed from the failure of Carillion but deny that there is any link between Government action and that financial pressure
9 What assessment has Government made ofthe impact ofCarilions failure to honour the prompt payment code for its sub-contractors or whether it has put any of them into financial distress How will Government encourage better compliance with prompt payment and ensure that such codes have credibility (See qq73-79)
6
In 2015 BEIS strengthened the Prompt Payment Code All of the governments Strategic Suppliers have signed up to the Code - promising to pay suppliers promptly and fairly
The Small eusiness Commissioner (SBC) role was created by the Enterprise Act 2016 to tackle late payment and poor payment practices in the private sector and Paul Uppal was appointed in the post in December 2017 The SBC is an independent public body and covers the whole of the United Kingdom
The SBC will provide general advice and information to small businesses on matters such as resolving disputes signpost small businesses to existing support and dispute resolution services through the SBCs website and consider complaints about payment issues between small business suppliers and their larger customers making (non-binding) recommendations on how the parties should resolve their disputes
In the 2017 Manifesto it says Government will be harnessing its buying power to ensure that its big contractors comply with the principles of the Prompt Payment Code We are deveroping the detail of how this will work within the procurement rules
In October 2017 the Government announced that it was looking at how a suppliers payment performance can be considered as part of the procurement process when bidding for public contracts We are working through the detail of how this will operate within the framework of the Public Contracts Regulations and will consult on our proposals soon
10 How many apprentices were employed by Carilions subcontractor companies before its collapse (See qq 88 99) What assessment has been made of the impact on apprenticeships with companies in financial trouble because of Carilions collapse (See q102)
Mr Halton asked how many apprentices within Carillions supply chain would be affected by its insolvency
In total the Carillion Group had over 9000 UK subcontractors Any assessment of the number of apprentices affected would require the identification of these sub-contractors followed by an individual analysis both of the number of apprentices employed by each one and how Carillions liquidation might affect it
During the Committee hearing Gareth Rhys Williams said that a number of apprentices being trained by Carillion Training Services (CTS) were employed by Carillion subcontractors In fact all of the apprentices being trained by CTS arewere employed by Carillion although many were seconded to other firms in the industry which then reimbursed Carillion for their employment costs
The Carillion Group employed andor trained some 1400 1Apprentices at the point of liquidation The Construction Industry Training Board (CITB) has been working to find new employment for these Apprentices including the provision of financial incentives to new employers To date some 753 Apprentices in England have been matched with new
1 This figure excludes Level 1 Learners who have been offered places on alternative courses
7
employers and approximately a further 180 have either completed their courses or decided to pursue other activities
The CITB remains confident of finding potential construction industry employers for all Apprentices who wish to complete their training The CITB has also worked with the Education and Skills Funding Agency to ensure funding is available to support the continued training of these Apprentices and Level 1 Learners
11 What reassurance can you provide about government contingency plans for other large government contractors (See qq116-121)
As John Manzoni said i~ the hearing government has contingency plans for a range of circumstances including possible difficulties faced by other large contractors These plans are proportionate to the criticality of the services supplied and the perceived level ofrisk
12 What will be the net cost for the Health Service of the collapse of Carillionmiddot for example due to legal and other costs associated with changing contracts (See q 130)
The net cost for NHS Trus_ts in changing services contracts under PFI arrangements should be restricted primarily to legal costs in inspecting the form of consent required to enable the SPV to change their subcontractor from Carillion to a new company If the Trusts wish to examine other opportunities such as changes to the main contract these costs may be higher but these are matters for the relevant Trust boards
The situation with regards to the two hospitals under construction is different Followin~ the failure of Carillion under PFI arrangements it is the responsibility of the Project Company (SPV) to find a new construction partner Both SPVs have identified possible candidates These replacement partners have been estimating the cost _to complete the respective hospitals Following these estimates it is up to the SPV to determine with its lenders the most appropriate wa_y to complete and maintain the hospital
13 How did the government consider how the collapse of Carillion could provide an opportunity for Government to exit an expensive PFI contract in respect of the health sector What opportunities still exist to exit such NHS contracts (See also qus 4-7 above)
The immediate priority for Government following the collapse of Carillion was to maintain public services It was important that cleaning porterage and other services continued so that hospitals and other health facilities could continue to operate at full capacity in the middle of winter The opportunities to exit these contracts have been considered alongside other options for the continuation of public services and within the constraints of the contracts which confer rights and place obligations on the counterparties
For the two PFI hospitals in construction the SPV and the lenders have committed the bulk of the investment needed to build the hospital and spent the majority of the money already They have a contractual right to be given time to try and find an alternativecontractor to finish the building work
8
For the hospitals and schools that were built using private finance upfront and where Carillion was providing Facilities Management and maintenance services via an SPV in the days following the liquidation the Official Receiver offered to step in with the same contingency services it was offering to other public services contracts to avoid any risk that public services would be disrupted even for a short time It would have been possible for the OR to stop providing these services and the SPVs are contractually obliged to find an alternative Facilities Management provider This would have taken some time and likely led to some disruption
Without the intervention of the Official Receiver some important public services would likely have suffered at least-a temporary disruption but the SPV would have had time to correct that loss of service and it would not have constituted a breach under the PFI contract such as to justify termination for cause
14 What delays are now expected to the completion of the two hospital construction projects in which Carillion was involved
Midland Metropolitan Hospital
The contract between the Trust and the SPV is still in place which means that the SPV is still contractually obliged to manage the project and find another construction or facilities
middot management services subcontractor who can continue to deliver the building work and subsequent services
The SPV is currently in discussions With the Official Receiver its lenders and with other service and construction companies and the Trust to assess how best to continue delivering these contracts
Royal Liverpool University Hospital
The PFI company at Royal Liverpool is in discussions with the Department for Health and Social Care the Trust and its senior lenders about the prospect of completing construction and delivering the subsequent services middot
The Trust Chief Executive issued a statement on 6 February 2018
In order to get construction started as soon as possible The Hospital Company is working to secure the services of existing sub-contractors and former Carillion construction staff to continue the work This is because they have the best understanding of the work that is required to finish the job
There are highly complex discussions taking place between various parties to get subshycontractors back on site as soon as possible However many of these firms are facing financial difficulties as a result of Carilfions collapse therefore this process will take some time Given this situation we expect a significant delay and it will prove challenging to get the new Royal finished before the end of the year
The Trust is doirig all it can to minimise the delay Our local politicians and others have all been hugely supportive and we will continue to liaise closely with them and the Department of Health We all want the best for our patients and the people of Liverpool and that is to move into our world class new hospital
9
15 What additional costs the official receiver and PWC have charged to which councils related to the transfer ofcontracts previously held with Carillion by those councils and what (a) financial and (b) other support the Government is providing to each of those councils related to such charges (See Qq 12426)
All customers that have received services following 15 January 2018 have been charged an uplift because of additional costs This uplift allows for the extra costs of supplying services resulting from the contraction of Carillions operation and the costs of the liquidation As Carillions fltgtrmer customers migrate to alternative providers the fixed costs at the centre of Carillion - IT back Office services call centres - have to be spread across a smaller number of contracts For public sector customers we anticipate a reconciliation process at some later point when a more accurate estimate of these extra costs has been gained Considerably higher additional costs would have been incurred if services to councils and other public sector customers had been discontinued and these have been avoided middot
In addition during the hearing Mr Jenkin asked about why Government is not getting first refusal on contracts and extracting value (Q131-141) I provide details on thispoint below middot
Where a public sector body is the direct customer of Carillion Government does effectively have first refusal on these contracts In the case of the MoJ (National Offender Management Service) contracts discussed in the Committee hearing Government is taking services back in-house through a Government-owned service company This action will transfer the employment of 1000 former Carillion staff to this service company and transfer a number of subcontracts These subcontractors employ a further 130 peple
This decision is open to any contracting authority holding a direct contract with Carillion In making such a decision the authority has to weigh up a number of considerations such as operational risk and value for money Both of these considerations are impacted by the speed of transition as the Official Receiver (OR) cannot sustain the former Carillion operations indefinitely and also as customers transition away from Carillion the remaining operations have to carry a higher burden of overhead and become more costly to run
The public sector does not have to put in an offer for these contracts Customers rely on the termination provisions in the existing contract with Carillion The OR is facilitating the transfer of former Carillion staff to new employers and to date over 8216 jobs have been preserved in this way
For the majority of relevant Carillion contracts the contract was between Carillion and a Project Company ($PV) which had been set up as part of PFI or PF2 arrangements This SPV then provides services to the public body concerned for example a hospital trust or a school The contract impacted by the liquidation was between Carillion and the SPV and not
between Carillion and the trust or school The risk of providing services has been passed by the PFI contract from the public body to the SPV The SPV must choose exactly how to continue that provision following the liquidation subject to the rights of the lenders The public body concerned does not have the option of taking services ~ack in house as a result of the liquidation as the SPV is not in liquidation
10
The OR has reached agreement with a major supplier to transfer part of Carillions business that fulfilled some of these service contracts with SPVs The supplier has agreed to pay the OR a consideration for this transfer which is subject to the agreement of those SPVs and the consent of the end customer
The OR is bound (by its legal obligations) to make a judgement regarding which course of a_ction returns the most value to the creditors of the liquidation It is also the ORs judgement that this bulk transfer offers the 111ost quick and efficient way to transfer these contracts to new management with the lowest risk of operational disruption to public services
11
Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
12
Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
Carillion with the SPV To the extent that Carillions failure has led to a breach of the SPVs contract with the public sector customer the contracts allow the SPV some time to repair the breach and in addition if the SPV fails then the lenders also have an opportunity to effect a repair If all these attempts fail then the PFI contract can be terminated and there are defined procedures that determine the rights of all parties including the public sector entity holding the contract
B What asse~sment have you made of the impact the collapse of Carillion has had on its subcontractors What level of losses have Carilions subcontractors incurred What impact has the collapse had on smaller contractors who may find it difficult to get support from banks due to their increased credit risk Did the governments attempt to keep Carillion going further increase the financial pressure on its subcontractors as their credit risk increased How many subcontractors will go out ofbusiness
Carillions debts are still being assessed by the Official Receiver but there is no doubt that many subcontractors were owed money by Carillion Those subcontractors that are owed money are being encouraged to register claims as unsecured creditors
The Government has put measures in place to help companies who are impacted by Carillions insolvency including extra support from the banks and time to pay taxes
Lenders have made a fund of pound900m available to support small businesses exposed to Carillions liquidation - and a Government taskforce led by the Secreatry of State for Business Energy and Industrial Strategy has been set up to monitor and advise on mitigating the impacts of Carillions liquidation on construction firms particularly SMEs and those working in the sector middot
The British Business 3ank through its Enterprise Support Scheme will guarantee loans of up to pound1 OOm through its partner banks which can be used to support overdraft borrowing and refinancing of existing debt
Lenders are contacting customers and where appropriate are putting in pl~ce emergency measures including overdraft extensions payment holidays and fee waivers to ensure those facing short term issues can be helped to stay on track
We dispute that government made an attempt to keep CariUion going further This was confirmed by the oral evidence of former Carillion directors to the joint PACACPAC session on 27 February 2018 Contracts which were awarded after Carillions profit warnings were only let to Carillion under the relevant procurement regulations and only where financial standing tests were still met It would be inappropriate for Government to award contracts to suppliers in order to prop them up and consideration of any such factors would be contrary to public procurement law We regret any financial pressure on subcontractors that has flowed from the failure of Carillion but deny that there is any link between Government action and that financial pressure
9 What assessment has Government made ofthe impact ofCarilions failure to honour the prompt payment code for its sub-contractors or whether it has put any of them into financial distress How will Government encourage better compliance with prompt payment and ensure that such codes have credibility (See qq73-79)
6
In 2015 BEIS strengthened the Prompt Payment Code All of the governments Strategic Suppliers have signed up to the Code - promising to pay suppliers promptly and fairly
The Small eusiness Commissioner (SBC) role was created by the Enterprise Act 2016 to tackle late payment and poor payment practices in the private sector and Paul Uppal was appointed in the post in December 2017 The SBC is an independent public body and covers the whole of the United Kingdom
The SBC will provide general advice and information to small businesses on matters such as resolving disputes signpost small businesses to existing support and dispute resolution services through the SBCs website and consider complaints about payment issues between small business suppliers and their larger customers making (non-binding) recommendations on how the parties should resolve their disputes
In the 2017 Manifesto it says Government will be harnessing its buying power to ensure that its big contractors comply with the principles of the Prompt Payment Code We are deveroping the detail of how this will work within the procurement rules
In October 2017 the Government announced that it was looking at how a suppliers payment performance can be considered as part of the procurement process when bidding for public contracts We are working through the detail of how this will operate within the framework of the Public Contracts Regulations and will consult on our proposals soon
10 How many apprentices were employed by Carilions subcontractor companies before its collapse (See qq 88 99) What assessment has been made of the impact on apprenticeships with companies in financial trouble because of Carilions collapse (See q102)
Mr Halton asked how many apprentices within Carillions supply chain would be affected by its insolvency
In total the Carillion Group had over 9000 UK subcontractors Any assessment of the number of apprentices affected would require the identification of these sub-contractors followed by an individual analysis both of the number of apprentices employed by each one and how Carillions liquidation might affect it
During the Committee hearing Gareth Rhys Williams said that a number of apprentices being trained by Carillion Training Services (CTS) were employed by Carillion subcontractors In fact all of the apprentices being trained by CTS arewere employed by Carillion although many were seconded to other firms in the industry which then reimbursed Carillion for their employment costs
The Carillion Group employed andor trained some 1400 1Apprentices at the point of liquidation The Construction Industry Training Board (CITB) has been working to find new employment for these Apprentices including the provision of financial incentives to new employers To date some 753 Apprentices in England have been matched with new
1 This figure excludes Level 1 Learners who have been offered places on alternative courses
7
employers and approximately a further 180 have either completed their courses or decided to pursue other activities
The CITB remains confident of finding potential construction industry employers for all Apprentices who wish to complete their training The CITB has also worked with the Education and Skills Funding Agency to ensure funding is available to support the continued training of these Apprentices and Level 1 Learners
11 What reassurance can you provide about government contingency plans for other large government contractors (See qq116-121)
As John Manzoni said i~ the hearing government has contingency plans for a range of circumstances including possible difficulties faced by other large contractors These plans are proportionate to the criticality of the services supplied and the perceived level ofrisk
12 What will be the net cost for the Health Service of the collapse of Carillionmiddot for example due to legal and other costs associated with changing contracts (See q 130)
The net cost for NHS Trus_ts in changing services contracts under PFI arrangements should be restricted primarily to legal costs in inspecting the form of consent required to enable the SPV to change their subcontractor from Carillion to a new company If the Trusts wish to examine other opportunities such as changes to the main contract these costs may be higher but these are matters for the relevant Trust boards
The situation with regards to the two hospitals under construction is different Followin~ the failure of Carillion under PFI arrangements it is the responsibility of the Project Company (SPV) to find a new construction partner Both SPVs have identified possible candidates These replacement partners have been estimating the cost _to complete the respective hospitals Following these estimates it is up to the SPV to determine with its lenders the most appropriate wa_y to complete and maintain the hospital
13 How did the government consider how the collapse of Carillion could provide an opportunity for Government to exit an expensive PFI contract in respect of the health sector What opportunities still exist to exit such NHS contracts (See also qus 4-7 above)
The immediate priority for Government following the collapse of Carillion was to maintain public services It was important that cleaning porterage and other services continued so that hospitals and other health facilities could continue to operate at full capacity in the middle of winter The opportunities to exit these contracts have been considered alongside other options for the continuation of public services and within the constraints of the contracts which confer rights and place obligations on the counterparties
For the two PFI hospitals in construction the SPV and the lenders have committed the bulk of the investment needed to build the hospital and spent the majority of the money already They have a contractual right to be given time to try and find an alternativecontractor to finish the building work
8
For the hospitals and schools that were built using private finance upfront and where Carillion was providing Facilities Management and maintenance services via an SPV in the days following the liquidation the Official Receiver offered to step in with the same contingency services it was offering to other public services contracts to avoid any risk that public services would be disrupted even for a short time It would have been possible for the OR to stop providing these services and the SPVs are contractually obliged to find an alternative Facilities Management provider This would have taken some time and likely led to some disruption
Without the intervention of the Official Receiver some important public services would likely have suffered at least-a temporary disruption but the SPV would have had time to correct that loss of service and it would not have constituted a breach under the PFI contract such as to justify termination for cause
14 What delays are now expected to the completion of the two hospital construction projects in which Carillion was involved
Midland Metropolitan Hospital
The contract between the Trust and the SPV is still in place which means that the SPV is still contractually obliged to manage the project and find another construction or facilities
middot management services subcontractor who can continue to deliver the building work and subsequent services
The SPV is currently in discussions With the Official Receiver its lenders and with other service and construction companies and the Trust to assess how best to continue delivering these contracts
Royal Liverpool University Hospital
The PFI company at Royal Liverpool is in discussions with the Department for Health and Social Care the Trust and its senior lenders about the prospect of completing construction and delivering the subsequent services middot
The Trust Chief Executive issued a statement on 6 February 2018
In order to get construction started as soon as possible The Hospital Company is working to secure the services of existing sub-contractors and former Carillion construction staff to continue the work This is because they have the best understanding of the work that is required to finish the job
There are highly complex discussions taking place between various parties to get subshycontractors back on site as soon as possible However many of these firms are facing financial difficulties as a result of Carilfions collapse therefore this process will take some time Given this situation we expect a significant delay and it will prove challenging to get the new Royal finished before the end of the year
The Trust is doirig all it can to minimise the delay Our local politicians and others have all been hugely supportive and we will continue to liaise closely with them and the Department of Health We all want the best for our patients and the people of Liverpool and that is to move into our world class new hospital
9
15 What additional costs the official receiver and PWC have charged to which councils related to the transfer ofcontracts previously held with Carillion by those councils and what (a) financial and (b) other support the Government is providing to each of those councils related to such charges (See Qq 12426)
All customers that have received services following 15 January 2018 have been charged an uplift because of additional costs This uplift allows for the extra costs of supplying services resulting from the contraction of Carillions operation and the costs of the liquidation As Carillions fltgtrmer customers migrate to alternative providers the fixed costs at the centre of Carillion - IT back Office services call centres - have to be spread across a smaller number of contracts For public sector customers we anticipate a reconciliation process at some later point when a more accurate estimate of these extra costs has been gained Considerably higher additional costs would have been incurred if services to councils and other public sector customers had been discontinued and these have been avoided middot
In addition during the hearing Mr Jenkin asked about why Government is not getting first refusal on contracts and extracting value (Q131-141) I provide details on thispoint below middot
Where a public sector body is the direct customer of Carillion Government does effectively have first refusal on these contracts In the case of the MoJ (National Offender Management Service) contracts discussed in the Committee hearing Government is taking services back in-house through a Government-owned service company This action will transfer the employment of 1000 former Carillion staff to this service company and transfer a number of subcontracts These subcontractors employ a further 130 peple
This decision is open to any contracting authority holding a direct contract with Carillion In making such a decision the authority has to weigh up a number of considerations such as operational risk and value for money Both of these considerations are impacted by the speed of transition as the Official Receiver (OR) cannot sustain the former Carillion operations indefinitely and also as customers transition away from Carillion the remaining operations have to carry a higher burden of overhead and become more costly to run
The public sector does not have to put in an offer for these contracts Customers rely on the termination provisions in the existing contract with Carillion The OR is facilitating the transfer of former Carillion staff to new employers and to date over 8216 jobs have been preserved in this way
For the majority of relevant Carillion contracts the contract was between Carillion and a Project Company ($PV) which had been set up as part of PFI or PF2 arrangements This SPV then provides services to the public body concerned for example a hospital trust or a school The contract impacted by the liquidation was between Carillion and the SPV and not
between Carillion and the trust or school The risk of providing services has been passed by the PFI contract from the public body to the SPV The SPV must choose exactly how to continue that provision following the liquidation subject to the rights of the lenders The public body concerned does not have the option of taking services ~ack in house as a result of the liquidation as the SPV is not in liquidation
10
The OR has reached agreement with a major supplier to transfer part of Carillions business that fulfilled some of these service contracts with SPVs The supplier has agreed to pay the OR a consideration for this transfer which is subject to the agreement of those SPVs and the consent of the end customer
The OR is bound (by its legal obligations) to make a judgement regarding which course of a_ction returns the most value to the creditors of the liquidation It is also the ORs judgement that this bulk transfer offers the 111ost quick and efficient way to transfer these contracts to new management with the lowest risk of operational disruption to public services
11
Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
12
Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
In 2015 BEIS strengthened the Prompt Payment Code All of the governments Strategic Suppliers have signed up to the Code - promising to pay suppliers promptly and fairly
The Small eusiness Commissioner (SBC) role was created by the Enterprise Act 2016 to tackle late payment and poor payment practices in the private sector and Paul Uppal was appointed in the post in December 2017 The SBC is an independent public body and covers the whole of the United Kingdom
The SBC will provide general advice and information to small businesses on matters such as resolving disputes signpost small businesses to existing support and dispute resolution services through the SBCs website and consider complaints about payment issues between small business suppliers and their larger customers making (non-binding) recommendations on how the parties should resolve their disputes
In the 2017 Manifesto it says Government will be harnessing its buying power to ensure that its big contractors comply with the principles of the Prompt Payment Code We are deveroping the detail of how this will work within the procurement rules
In October 2017 the Government announced that it was looking at how a suppliers payment performance can be considered as part of the procurement process when bidding for public contracts We are working through the detail of how this will operate within the framework of the Public Contracts Regulations and will consult on our proposals soon
10 How many apprentices were employed by Carilions subcontractor companies before its collapse (See qq 88 99) What assessment has been made of the impact on apprenticeships with companies in financial trouble because of Carilions collapse (See q102)
Mr Halton asked how many apprentices within Carillions supply chain would be affected by its insolvency
In total the Carillion Group had over 9000 UK subcontractors Any assessment of the number of apprentices affected would require the identification of these sub-contractors followed by an individual analysis both of the number of apprentices employed by each one and how Carillions liquidation might affect it
During the Committee hearing Gareth Rhys Williams said that a number of apprentices being trained by Carillion Training Services (CTS) were employed by Carillion subcontractors In fact all of the apprentices being trained by CTS arewere employed by Carillion although many were seconded to other firms in the industry which then reimbursed Carillion for their employment costs
The Carillion Group employed andor trained some 1400 1Apprentices at the point of liquidation The Construction Industry Training Board (CITB) has been working to find new employment for these Apprentices including the provision of financial incentives to new employers To date some 753 Apprentices in England have been matched with new
1 This figure excludes Level 1 Learners who have been offered places on alternative courses
7
employers and approximately a further 180 have either completed their courses or decided to pursue other activities
The CITB remains confident of finding potential construction industry employers for all Apprentices who wish to complete their training The CITB has also worked with the Education and Skills Funding Agency to ensure funding is available to support the continued training of these Apprentices and Level 1 Learners
11 What reassurance can you provide about government contingency plans for other large government contractors (See qq116-121)
As John Manzoni said i~ the hearing government has contingency plans for a range of circumstances including possible difficulties faced by other large contractors These plans are proportionate to the criticality of the services supplied and the perceived level ofrisk
12 What will be the net cost for the Health Service of the collapse of Carillionmiddot for example due to legal and other costs associated with changing contracts (See q 130)
The net cost for NHS Trus_ts in changing services contracts under PFI arrangements should be restricted primarily to legal costs in inspecting the form of consent required to enable the SPV to change their subcontractor from Carillion to a new company If the Trusts wish to examine other opportunities such as changes to the main contract these costs may be higher but these are matters for the relevant Trust boards
The situation with regards to the two hospitals under construction is different Followin~ the failure of Carillion under PFI arrangements it is the responsibility of the Project Company (SPV) to find a new construction partner Both SPVs have identified possible candidates These replacement partners have been estimating the cost _to complete the respective hospitals Following these estimates it is up to the SPV to determine with its lenders the most appropriate wa_y to complete and maintain the hospital
13 How did the government consider how the collapse of Carillion could provide an opportunity for Government to exit an expensive PFI contract in respect of the health sector What opportunities still exist to exit such NHS contracts (See also qus 4-7 above)
The immediate priority for Government following the collapse of Carillion was to maintain public services It was important that cleaning porterage and other services continued so that hospitals and other health facilities could continue to operate at full capacity in the middle of winter The opportunities to exit these contracts have been considered alongside other options for the continuation of public services and within the constraints of the contracts which confer rights and place obligations on the counterparties
For the two PFI hospitals in construction the SPV and the lenders have committed the bulk of the investment needed to build the hospital and spent the majority of the money already They have a contractual right to be given time to try and find an alternativecontractor to finish the building work
8
For the hospitals and schools that were built using private finance upfront and where Carillion was providing Facilities Management and maintenance services via an SPV in the days following the liquidation the Official Receiver offered to step in with the same contingency services it was offering to other public services contracts to avoid any risk that public services would be disrupted even for a short time It would have been possible for the OR to stop providing these services and the SPVs are contractually obliged to find an alternative Facilities Management provider This would have taken some time and likely led to some disruption
Without the intervention of the Official Receiver some important public services would likely have suffered at least-a temporary disruption but the SPV would have had time to correct that loss of service and it would not have constituted a breach under the PFI contract such as to justify termination for cause
14 What delays are now expected to the completion of the two hospital construction projects in which Carillion was involved
Midland Metropolitan Hospital
The contract between the Trust and the SPV is still in place which means that the SPV is still contractually obliged to manage the project and find another construction or facilities
middot management services subcontractor who can continue to deliver the building work and subsequent services
The SPV is currently in discussions With the Official Receiver its lenders and with other service and construction companies and the Trust to assess how best to continue delivering these contracts
Royal Liverpool University Hospital
The PFI company at Royal Liverpool is in discussions with the Department for Health and Social Care the Trust and its senior lenders about the prospect of completing construction and delivering the subsequent services middot
The Trust Chief Executive issued a statement on 6 February 2018
In order to get construction started as soon as possible The Hospital Company is working to secure the services of existing sub-contractors and former Carillion construction staff to continue the work This is because they have the best understanding of the work that is required to finish the job
There are highly complex discussions taking place between various parties to get subshycontractors back on site as soon as possible However many of these firms are facing financial difficulties as a result of Carilfions collapse therefore this process will take some time Given this situation we expect a significant delay and it will prove challenging to get the new Royal finished before the end of the year
The Trust is doirig all it can to minimise the delay Our local politicians and others have all been hugely supportive and we will continue to liaise closely with them and the Department of Health We all want the best for our patients and the people of Liverpool and that is to move into our world class new hospital
9
15 What additional costs the official receiver and PWC have charged to which councils related to the transfer ofcontracts previously held with Carillion by those councils and what (a) financial and (b) other support the Government is providing to each of those councils related to such charges (See Qq 12426)
All customers that have received services following 15 January 2018 have been charged an uplift because of additional costs This uplift allows for the extra costs of supplying services resulting from the contraction of Carillions operation and the costs of the liquidation As Carillions fltgtrmer customers migrate to alternative providers the fixed costs at the centre of Carillion - IT back Office services call centres - have to be spread across a smaller number of contracts For public sector customers we anticipate a reconciliation process at some later point when a more accurate estimate of these extra costs has been gained Considerably higher additional costs would have been incurred if services to councils and other public sector customers had been discontinued and these have been avoided middot
In addition during the hearing Mr Jenkin asked about why Government is not getting first refusal on contracts and extracting value (Q131-141) I provide details on thispoint below middot
Where a public sector body is the direct customer of Carillion Government does effectively have first refusal on these contracts In the case of the MoJ (National Offender Management Service) contracts discussed in the Committee hearing Government is taking services back in-house through a Government-owned service company This action will transfer the employment of 1000 former Carillion staff to this service company and transfer a number of subcontracts These subcontractors employ a further 130 peple
This decision is open to any contracting authority holding a direct contract with Carillion In making such a decision the authority has to weigh up a number of considerations such as operational risk and value for money Both of these considerations are impacted by the speed of transition as the Official Receiver (OR) cannot sustain the former Carillion operations indefinitely and also as customers transition away from Carillion the remaining operations have to carry a higher burden of overhead and become more costly to run
The public sector does not have to put in an offer for these contracts Customers rely on the termination provisions in the existing contract with Carillion The OR is facilitating the transfer of former Carillion staff to new employers and to date over 8216 jobs have been preserved in this way
For the majority of relevant Carillion contracts the contract was between Carillion and a Project Company ($PV) which had been set up as part of PFI or PF2 arrangements This SPV then provides services to the public body concerned for example a hospital trust or a school The contract impacted by the liquidation was between Carillion and the SPV and not
between Carillion and the trust or school The risk of providing services has been passed by the PFI contract from the public body to the SPV The SPV must choose exactly how to continue that provision following the liquidation subject to the rights of the lenders The public body concerned does not have the option of taking services ~ack in house as a result of the liquidation as the SPV is not in liquidation
10
The OR has reached agreement with a major supplier to transfer part of Carillions business that fulfilled some of these service contracts with SPVs The supplier has agreed to pay the OR a consideration for this transfer which is subject to the agreement of those SPVs and the consent of the end customer
The OR is bound (by its legal obligations) to make a judgement regarding which course of a_ction returns the most value to the creditors of the liquidation It is also the ORs judgement that this bulk transfer offers the 111ost quick and efficient way to transfer these contracts to new management with the lowest risk of operational disruption to public services
11
Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
12
Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
employers and approximately a further 180 have either completed their courses or decided to pursue other activities
The CITB remains confident of finding potential construction industry employers for all Apprentices who wish to complete their training The CITB has also worked with the Education and Skills Funding Agency to ensure funding is available to support the continued training of these Apprentices and Level 1 Learners
11 What reassurance can you provide about government contingency plans for other large government contractors (See qq116-121)
As John Manzoni said i~ the hearing government has contingency plans for a range of circumstances including possible difficulties faced by other large contractors These plans are proportionate to the criticality of the services supplied and the perceived level ofrisk
12 What will be the net cost for the Health Service of the collapse of Carillionmiddot for example due to legal and other costs associated with changing contracts (See q 130)
The net cost for NHS Trus_ts in changing services contracts under PFI arrangements should be restricted primarily to legal costs in inspecting the form of consent required to enable the SPV to change their subcontractor from Carillion to a new company If the Trusts wish to examine other opportunities such as changes to the main contract these costs may be higher but these are matters for the relevant Trust boards
The situation with regards to the two hospitals under construction is different Followin~ the failure of Carillion under PFI arrangements it is the responsibility of the Project Company (SPV) to find a new construction partner Both SPVs have identified possible candidates These replacement partners have been estimating the cost _to complete the respective hospitals Following these estimates it is up to the SPV to determine with its lenders the most appropriate wa_y to complete and maintain the hospital
13 How did the government consider how the collapse of Carillion could provide an opportunity for Government to exit an expensive PFI contract in respect of the health sector What opportunities still exist to exit such NHS contracts (See also qus 4-7 above)
The immediate priority for Government following the collapse of Carillion was to maintain public services It was important that cleaning porterage and other services continued so that hospitals and other health facilities could continue to operate at full capacity in the middle of winter The opportunities to exit these contracts have been considered alongside other options for the continuation of public services and within the constraints of the contracts which confer rights and place obligations on the counterparties
For the two PFI hospitals in construction the SPV and the lenders have committed the bulk of the investment needed to build the hospital and spent the majority of the money already They have a contractual right to be given time to try and find an alternativecontractor to finish the building work
8
For the hospitals and schools that were built using private finance upfront and where Carillion was providing Facilities Management and maintenance services via an SPV in the days following the liquidation the Official Receiver offered to step in with the same contingency services it was offering to other public services contracts to avoid any risk that public services would be disrupted even for a short time It would have been possible for the OR to stop providing these services and the SPVs are contractually obliged to find an alternative Facilities Management provider This would have taken some time and likely led to some disruption
Without the intervention of the Official Receiver some important public services would likely have suffered at least-a temporary disruption but the SPV would have had time to correct that loss of service and it would not have constituted a breach under the PFI contract such as to justify termination for cause
14 What delays are now expected to the completion of the two hospital construction projects in which Carillion was involved
Midland Metropolitan Hospital
The contract between the Trust and the SPV is still in place which means that the SPV is still contractually obliged to manage the project and find another construction or facilities
middot management services subcontractor who can continue to deliver the building work and subsequent services
The SPV is currently in discussions With the Official Receiver its lenders and with other service and construction companies and the Trust to assess how best to continue delivering these contracts
Royal Liverpool University Hospital
The PFI company at Royal Liverpool is in discussions with the Department for Health and Social Care the Trust and its senior lenders about the prospect of completing construction and delivering the subsequent services middot
The Trust Chief Executive issued a statement on 6 February 2018
In order to get construction started as soon as possible The Hospital Company is working to secure the services of existing sub-contractors and former Carillion construction staff to continue the work This is because they have the best understanding of the work that is required to finish the job
There are highly complex discussions taking place between various parties to get subshycontractors back on site as soon as possible However many of these firms are facing financial difficulties as a result of Carilfions collapse therefore this process will take some time Given this situation we expect a significant delay and it will prove challenging to get the new Royal finished before the end of the year
The Trust is doirig all it can to minimise the delay Our local politicians and others have all been hugely supportive and we will continue to liaise closely with them and the Department of Health We all want the best for our patients and the people of Liverpool and that is to move into our world class new hospital
9
15 What additional costs the official receiver and PWC have charged to which councils related to the transfer ofcontracts previously held with Carillion by those councils and what (a) financial and (b) other support the Government is providing to each of those councils related to such charges (See Qq 12426)
All customers that have received services following 15 January 2018 have been charged an uplift because of additional costs This uplift allows for the extra costs of supplying services resulting from the contraction of Carillions operation and the costs of the liquidation As Carillions fltgtrmer customers migrate to alternative providers the fixed costs at the centre of Carillion - IT back Office services call centres - have to be spread across a smaller number of contracts For public sector customers we anticipate a reconciliation process at some later point when a more accurate estimate of these extra costs has been gained Considerably higher additional costs would have been incurred if services to councils and other public sector customers had been discontinued and these have been avoided middot
In addition during the hearing Mr Jenkin asked about why Government is not getting first refusal on contracts and extracting value (Q131-141) I provide details on thispoint below middot
Where a public sector body is the direct customer of Carillion Government does effectively have first refusal on these contracts In the case of the MoJ (National Offender Management Service) contracts discussed in the Committee hearing Government is taking services back in-house through a Government-owned service company This action will transfer the employment of 1000 former Carillion staff to this service company and transfer a number of subcontracts These subcontractors employ a further 130 peple
This decision is open to any contracting authority holding a direct contract with Carillion In making such a decision the authority has to weigh up a number of considerations such as operational risk and value for money Both of these considerations are impacted by the speed of transition as the Official Receiver (OR) cannot sustain the former Carillion operations indefinitely and also as customers transition away from Carillion the remaining operations have to carry a higher burden of overhead and become more costly to run
The public sector does not have to put in an offer for these contracts Customers rely on the termination provisions in the existing contract with Carillion The OR is facilitating the transfer of former Carillion staff to new employers and to date over 8216 jobs have been preserved in this way
For the majority of relevant Carillion contracts the contract was between Carillion and a Project Company ($PV) which had been set up as part of PFI or PF2 arrangements This SPV then provides services to the public body concerned for example a hospital trust or a school The contract impacted by the liquidation was between Carillion and the SPV and not
between Carillion and the trust or school The risk of providing services has been passed by the PFI contract from the public body to the SPV The SPV must choose exactly how to continue that provision following the liquidation subject to the rights of the lenders The public body concerned does not have the option of taking services ~ack in house as a result of the liquidation as the SPV is not in liquidation
10
The OR has reached agreement with a major supplier to transfer part of Carillions business that fulfilled some of these service contracts with SPVs The supplier has agreed to pay the OR a consideration for this transfer which is subject to the agreement of those SPVs and the consent of the end customer
The OR is bound (by its legal obligations) to make a judgement regarding which course of a_ction returns the most value to the creditors of the liquidation It is also the ORs judgement that this bulk transfer offers the 111ost quick and efficient way to transfer these contracts to new management with the lowest risk of operational disruption to public services
11
Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
12
Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
For the hospitals and schools that were built using private finance upfront and where Carillion was providing Facilities Management and maintenance services via an SPV in the days following the liquidation the Official Receiver offered to step in with the same contingency services it was offering to other public services contracts to avoid any risk that public services would be disrupted even for a short time It would have been possible for the OR to stop providing these services and the SPVs are contractually obliged to find an alternative Facilities Management provider This would have taken some time and likely led to some disruption
Without the intervention of the Official Receiver some important public services would likely have suffered at least-a temporary disruption but the SPV would have had time to correct that loss of service and it would not have constituted a breach under the PFI contract such as to justify termination for cause
14 What delays are now expected to the completion of the two hospital construction projects in which Carillion was involved
Midland Metropolitan Hospital
The contract between the Trust and the SPV is still in place which means that the SPV is still contractually obliged to manage the project and find another construction or facilities
middot management services subcontractor who can continue to deliver the building work and subsequent services
The SPV is currently in discussions With the Official Receiver its lenders and with other service and construction companies and the Trust to assess how best to continue delivering these contracts
Royal Liverpool University Hospital
The PFI company at Royal Liverpool is in discussions with the Department for Health and Social Care the Trust and its senior lenders about the prospect of completing construction and delivering the subsequent services middot
The Trust Chief Executive issued a statement on 6 February 2018
In order to get construction started as soon as possible The Hospital Company is working to secure the services of existing sub-contractors and former Carillion construction staff to continue the work This is because they have the best understanding of the work that is required to finish the job
There are highly complex discussions taking place between various parties to get subshycontractors back on site as soon as possible However many of these firms are facing financial difficulties as a result of Carilfions collapse therefore this process will take some time Given this situation we expect a significant delay and it will prove challenging to get the new Royal finished before the end of the year
The Trust is doirig all it can to minimise the delay Our local politicians and others have all been hugely supportive and we will continue to liaise closely with them and the Department of Health We all want the best for our patients and the people of Liverpool and that is to move into our world class new hospital
9
15 What additional costs the official receiver and PWC have charged to which councils related to the transfer ofcontracts previously held with Carillion by those councils and what (a) financial and (b) other support the Government is providing to each of those councils related to such charges (See Qq 12426)
All customers that have received services following 15 January 2018 have been charged an uplift because of additional costs This uplift allows for the extra costs of supplying services resulting from the contraction of Carillions operation and the costs of the liquidation As Carillions fltgtrmer customers migrate to alternative providers the fixed costs at the centre of Carillion - IT back Office services call centres - have to be spread across a smaller number of contracts For public sector customers we anticipate a reconciliation process at some later point when a more accurate estimate of these extra costs has been gained Considerably higher additional costs would have been incurred if services to councils and other public sector customers had been discontinued and these have been avoided middot
In addition during the hearing Mr Jenkin asked about why Government is not getting first refusal on contracts and extracting value (Q131-141) I provide details on thispoint below middot
Where a public sector body is the direct customer of Carillion Government does effectively have first refusal on these contracts In the case of the MoJ (National Offender Management Service) contracts discussed in the Committee hearing Government is taking services back in-house through a Government-owned service company This action will transfer the employment of 1000 former Carillion staff to this service company and transfer a number of subcontracts These subcontractors employ a further 130 peple
This decision is open to any contracting authority holding a direct contract with Carillion In making such a decision the authority has to weigh up a number of considerations such as operational risk and value for money Both of these considerations are impacted by the speed of transition as the Official Receiver (OR) cannot sustain the former Carillion operations indefinitely and also as customers transition away from Carillion the remaining operations have to carry a higher burden of overhead and become more costly to run
The public sector does not have to put in an offer for these contracts Customers rely on the termination provisions in the existing contract with Carillion The OR is facilitating the transfer of former Carillion staff to new employers and to date over 8216 jobs have been preserved in this way
For the majority of relevant Carillion contracts the contract was between Carillion and a Project Company ($PV) which had been set up as part of PFI or PF2 arrangements This SPV then provides services to the public body concerned for example a hospital trust or a school The contract impacted by the liquidation was between Carillion and the SPV and not
between Carillion and the trust or school The risk of providing services has been passed by the PFI contract from the public body to the SPV The SPV must choose exactly how to continue that provision following the liquidation subject to the rights of the lenders The public body concerned does not have the option of taking services ~ack in house as a result of the liquidation as the SPV is not in liquidation
10
The OR has reached agreement with a major supplier to transfer part of Carillions business that fulfilled some of these service contracts with SPVs The supplier has agreed to pay the OR a consideration for this transfer which is subject to the agreement of those SPVs and the consent of the end customer
The OR is bound (by its legal obligations) to make a judgement regarding which course of a_ction returns the most value to the creditors of the liquidation It is also the ORs judgement that this bulk transfer offers the 111ost quick and efficient way to transfer these contracts to new management with the lowest risk of operational disruption to public services
11
Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
12
Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
15 What additional costs the official receiver and PWC have charged to which councils related to the transfer ofcontracts previously held with Carillion by those councils and what (a) financial and (b) other support the Government is providing to each of those councils related to such charges (See Qq 12426)
All customers that have received services following 15 January 2018 have been charged an uplift because of additional costs This uplift allows for the extra costs of supplying services resulting from the contraction of Carillions operation and the costs of the liquidation As Carillions fltgtrmer customers migrate to alternative providers the fixed costs at the centre of Carillion - IT back Office services call centres - have to be spread across a smaller number of contracts For public sector customers we anticipate a reconciliation process at some later point when a more accurate estimate of these extra costs has been gained Considerably higher additional costs would have been incurred if services to councils and other public sector customers had been discontinued and these have been avoided middot
In addition during the hearing Mr Jenkin asked about why Government is not getting first refusal on contracts and extracting value (Q131-141) I provide details on thispoint below middot
Where a public sector body is the direct customer of Carillion Government does effectively have first refusal on these contracts In the case of the MoJ (National Offender Management Service) contracts discussed in the Committee hearing Government is taking services back in-house through a Government-owned service company This action will transfer the employment of 1000 former Carillion staff to this service company and transfer a number of subcontracts These subcontractors employ a further 130 peple
This decision is open to any contracting authority holding a direct contract with Carillion In making such a decision the authority has to weigh up a number of considerations such as operational risk and value for money Both of these considerations are impacted by the speed of transition as the Official Receiver (OR) cannot sustain the former Carillion operations indefinitely and also as customers transition away from Carillion the remaining operations have to carry a higher burden of overhead and become more costly to run
The public sector does not have to put in an offer for these contracts Customers rely on the termination provisions in the existing contract with Carillion The OR is facilitating the transfer of former Carillion staff to new employers and to date over 8216 jobs have been preserved in this way
For the majority of relevant Carillion contracts the contract was between Carillion and a Project Company ($PV) which had been set up as part of PFI or PF2 arrangements This SPV then provides services to the public body concerned for example a hospital trust or a school The contract impacted by the liquidation was between Carillion and the SPV and not
between Carillion and the trust or school The risk of providing services has been passed by the PFI contract from the public body to the SPV The SPV must choose exactly how to continue that provision following the liquidation subject to the rights of the lenders The public body concerned does not have the option of taking services ~ack in house as a result of the liquidation as the SPV is not in liquidation
10
The OR has reached agreement with a major supplier to transfer part of Carillions business that fulfilled some of these service contracts with SPVs The supplier has agreed to pay the OR a consideration for this transfer which is subject to the agreement of those SPVs and the consent of the end customer
The OR is bound (by its legal obligations) to make a judgement regarding which course of a_ction returns the most value to the creditors of the liquidation It is also the ORs judgement that this bulk transfer offers the 111ost quick and efficient way to transfer these contracts to new management with the lowest risk of operational disruption to public services
11
Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
12
Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
The OR has reached agreement with a major supplier to transfer part of Carillions business that fulfilled some of these service contracts with SPVs The supplier has agreed to pay the OR a consideration for this transfer which is subject to the agreement of those SPVs and the consent of the end customer
The OR is bound (by its legal obligations) to make a judgement regarding which course of a_ction returns the most value to the creditors of the liquidation It is also the ORs judgement that this bulk transfer offers the 111ost quick and efficient way to transfer these contracts to new management with the lowest risk of operational disruption to public services
11
Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
12
Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
Annex A - Contracts List
Contract Name middotcontracting Authority Department Land Registry FM Land Registry BEIS
ACKtiv JV Sellafield Limited BEIS
British Museum FM British Museum OCMS
The Heath Academy OFE OFE
British Transport Police FM British Transport Police OFT
A14JV Highways England OFT
M60JV Highways England OFT
A 1 Elkesley Junction Improvements Highways England OFT
A 1 Leeming to Barton Highways England OFT
M6 Jct 16 to 19 Kier JV Highways England OFT
M6 Jct 13 to 15 Kier JV Highways England OFT
M20 Jct 3 to 5 Kier JV Highways England OFT
M23 Jct 8 to 10 Kier JV Highways England OFT
Carillion Traffic management services lot 11 and lot 13 Highways England OFT
Carillion construction - contract for buildability advice with Highways Highways England OFT
England Carillion Rail - historic railwayey estate examinations East North and West Highways England OFT
Lot Central 2 North Portal Chiltern tunnels to Brackley - CEK JV HS2 OFT
Lot Central 3 Brackley to South Portal of Long ltchington Wood Green tunnel HS2 OFT
-CEKJV Kettering to Corby- GRIP 34_5 Network Rail OFT
middot Kettering to Corby Works NetVork Rail OFT
Market Harborough Grip 3 Phase 3C Network Rail OFT
Market Harborough LSI Network Rail OFT
London to Corby MML Network Rail OFT
Brent Cross station - Grip 34 Network Rail OFT
L2C TampC (Package 1) Network Rail OFT
NEP - MMLScotland Network Rail OFT
PLTR- LNE -WBI 2017-2018 Network Rail OFT
Sheffield Tram Train EarlyMain Works Network Rail OFT
IEP Gauging Priority 2 Sites Network Rail OFT
North West Electrification Programme Network Rail OFT
OOCPA Network Rail OFT
WITI (Western Inner Track Imp) Network Rail OFT
Oxford Corridor Trackworks Network Rail OFT
West Ealing Sidings Network Rail DFT
Knottingley Area LX Renewals Network Rail OFT
EW Rail Project (CBJV) Network Rail DFT
Cardiff Intersection Bridges Network Rail OFT
12
Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
Ebbw Vale Frequency Enhancement Network Rail OFT CPS Western Design Network Rail OFT
CPS Renewals Oxford Network Rail OFT Splott Road Bridge Network Rail OFT
Doncaster Station K107 Network Rail OFT Kettering Electric Stabling K167 Network Rail OFT
PLTR - LNW - WBI 2017-2018 NW069 Network Rail OFT Stroud Valley LX SIG009 Network Rail OFT
Home Office South FM Home Office HO Leeds City Cycle Super Highway 5094 Leeds City Council Local Government
Birmingham City Council Birmingham City Council Local Government
FARRS - MSF2 Framework Doncaster Metropolitan Borough Council Local Government
Whitehill To Bordon East Hampshire District Council Local Government The Heath School Halton Borough Council Local Government
Harrow Library Harrow Borough Council Local Government
Vision Tameside -TMBC Offices Main Building Inspired Spaces Tameside Ltd Local Government
Temple Green Park amp Ride Leeds City Council Local Government A58M Essential Maintenance ph 2 Leeds City Council Local Government
Elland Road Park amp Ride Ph2 Leeds City Council Local Government Lincoln Eastern Bypass Lincolnshire County Council Local Government
Croydon Libraries London Borough of Croydon Local Goverriment Ealing Library London Borough of Ealing Local Government
Hackney Learning Centre London Borough of Hackney Local Government Hounslow Parks London Borough of Hounslow Local Government Hounslow Library London Borough of Hounslow Local Government
MSF2 Framework JV Midlands Highways Alliance Local Government Morpeth Construction Phase Northumberland County Council Local Government Oxford County Council FM - Oxfordshire County Council Local Government King Alfreds School Oxford Oxfordshire CountyCouncil Local Government
Lower Don Valley Flood Defence middot Scheme Sheffield CC Local Government
Tinsley Link Sheffield CC Local Government A45 South Bridge Replacement Solihull CC Local Government
Taunton NIDR Somerset County Council Local Government A6 to Manchester Airport Relief Road Stockport County Council Local Government
Stockport Strategic Partnership Stockport Metropolitan Borough Council
Local Government
Tameside Primary School Catering Tameside Metropolitan Borough Council Local Government
Tameside FM Tameside Metropolitan Borough Council Local Government
ELL Maintenance Transport For London Local Government
13
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
Local Government Heltwate SEN School Peterborough City Council Local Government Jack Hunt Secondary School Peterborough City Council
MOD[REDACTED] [REDACTED] MOD[REDACTED] [REDACTED] MOD[REDACTED) [REDACTED] MODHestia Southeast DIO MODHestia Scotland amp NI DIO MODHestia North DIO MODCarillion Amey (Regional Primes) DIO MODCarillion Amey (Housing Prime) DIO MOJPrisons HMPPS MOJLegal Aid Agency MOJ
14
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
(poundm) Sector
Babcock 4547 77 27000 3386
Capita 4909 34 54750 1112
G4S 7590 8 34000 4054
Serco 3011 42 25200 1049
Amey (Parent 10759 16 17282 12587 Ferrovial)
Atkins (Parent 1862 19 8527 9985 SNC-Lavalin)
lnterserve 3245 49 50000 109
ISS 9311 67 43000 41868
Engie 58441 14 19000 32218
Mitie 2126 26 62600 601
Sodexo 17745 59 35000 middot 15346
BT 24062 4 82800 23772
Motorola 4556 06 Not reported 17497
Vodafone 42533 1 13238 54970
Virgin Media 15097 3 13600 7250 (Parent Liberty
Global)
Arqiva 944 25 2112 na
Accenture 26255 06 9330 101858
Atos 10464 7 9000 11767
Capgemini 11 197 6 8342 17741
CGI 8060 5 5600 15050
DXC 17600 8 15000 29254
Fujitsu 30400 24 middot 10972 1320
IBM 60060 1 13134 144617
Microsoft 68000 06 3000 727091
Oracle 28800 09 5000 215797
Sopra Steria 3341 11 6700 3464
BAE Systems 17790 1 33000 18719
15
Note market data correct as of 9 March 2018
16
Annex B - Headline Statistics on Strategic Suppliers
Strategic Supplier Total Annual of Revenue Number of middotMarket Revenue 2016 from UK Public UK Employees Cap (poundm)
![The Journey Mapping Guidance Cabinet Office[1]](https://static.documents.pub/doc/80x56/54c79e054a7959551f8b45cd/the-journey-mapping-guidance-cabinet-office1.jpg)
