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MPs to probe government relationship with suppliers after Carillion collapse raises ‘significant concerns’

'Great secrecy' surrounds key contracts for vital public services, Public Accounts Committee says

Ben Chapman
Wednesday 23 May 2018 13:46 BST
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Auditors have faced criticism after high-profile company collapses like Carillion
Auditors have faced criticism after high-profile company collapses like Carillion

Carillion’s collapse has raised “significant concerns” about the government's relationship with major suppliers, and the potential impact on the delivery of important public services, an MPs' report has said.

The House of Commons requested that the government hand over its risk assessments of 28 “strategic suppliers”, including Carillion, to the Public Accounts Committee (PAC) in January.

The documents, which are compiled by independent Crown Representatives, detail concerns about the suppliers. Each is given a risk rating of amber, red or black based on publicly available information such as financial reports, as well as the government's own information on contract performance.

The committee said it will hold an inquiry into concerns raised by the papers relating to suppliers with rated amber, red or black.

Carillion had been rated amber for months because of poor performance on its contracts with the Ministry of Defence and Ministry of Justice, but it was not until after the company issued a profit warning in July 2017 that the government downgraded it to red, the PAC said.

The report said it appears that the government was not aware of financial distress at the company until this point. Carillion was downgraded to black in November 2017 and collapsed less than two months later in January 2018 with the loss of thousands of jobs.

Meg Hillier, who chairs the committee, said “great secrecy” surrounds large Government contracts. While the committee was mindful of commercial sensitivities around the assessment she said this had to be balanced against “the lack of transparency and its potential to create an environment where poor practice takes root”.

She added: “Taxpayers deserve to know where their money is going, that their investment is being managed wisely and that Government is providing effective oversight.

“The Carillion papers identify clear and compelling problems with the business in the months leading to its collapse. Government had the opportunity to deal with them.

“Taxpayers, service users and people and businesses plunged into financial difficulty by Carillion's demise deserve to know what happened.

“We want to look wider and better understand the relationship between strategic suppliers and Government.

“Failure of essential services is not an option so we need to understand the potential risks to the taxpayer.”

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