Few could have imagined that one of the UK’s largest contractors would fall into financial ruin, leaving a gaping hole in the construction industry in terms of delivery of projects. While it has opened up opportunities for other companies to step in and fill the gap, it has also highlighted the need for a more careful review of contracting suppliers in terms of their financial health. If the Carillion collapse is anything to go by it has proven that one cannot assume that just because a company is large and established that it is in fact operating in the black.
Highways England reviews policies
At the time of Carillion’s liquidation it was undertaking hundreds of millions worth of work for Highways England which included joint ventures with other major industry players such as Kier and Balfour Beatty. Highways England admits that it has not only had to increase the stringency of financial reviews of suppliers but also clarify what steps are to be taken in the event that contractors fail to deliver on their contractual obligations.
The joint ventures in place for Highways England may have been their saving grace as it meant that the other partners who were already familiar with the projects could expand their current operations by increasing their staff to accommodate the increase in output required. After all, there were a whole lot of skilled Carillion employees now looking for jobs.
New opportunities for contractors
With Carillion out of the picture and the introduction of the Highways England new RDP framework later this year, it won’t be surprising if new players enter the game. As this plan seeks to appoint a number of suppliers in eight different lots across different regions it is an opportunity for smaller contractors to get a foot in the door. If smaller contractors can show that they have the skills and capacity to fulfill the contracts and they have sound financials to boot they could find themselves on the preferred suppliers list for Highways England.
Will there be mutual benefit?
One of the reasons cited for the Carillion collapse is the delayed PF1 scheme for the Aberdeen Western Peripheral Route – a deal worth £845m in which Carillion and their joint venture partners suffered massive losses. While suppliers find themselves under obligation to prove financial stability, will the same apply to those making supplier appointments?