Lawmakers urge UK to learn from Carillion’s failure

LONDONThe UK government has a “depressing inability” to learn from repeated mistakes in contracting for outside services and must use the collapse of Carillion plc to learn how to do better, according to a parliamentary report.

Carillion, an outsourcing company with deals in everything from hospitals to a high-speed rail project, collapsed in January and left behind debts of about £1.6 billion (RM8.64 billion) after a series of construction agreements soured. The failure has led to a number of parliamentary inquiries and increased scrutiny of government procurement.

In a report from the Public Administration and Constitutional Affairs Committee published yesterday, lawmakers said the government must stop prioritising cost over risk and quality.

“Despite the UK leading innovation in this field for some 30-40 years, there has been a depressing inability of central government to learn from repeated mistakes,” the report said. “To some extent the collapse of Carillion and the state of the sector reflect this.”

The UK government spends about £250 billion a year on outsourcing and contracting, according to the report, but decisions are often unclear. The government should be forced to justify its reasons publicly and better understand the risks it’s transferring to third parties before awarding contracts, the report said.

The report also criticised the use of deals in which private firms are contracted to fund, construct and maintain projects, getting repaid over many years. There are currently about 700 such arrangements, which keep debt off the government’s balance sheet, worth about £60 billion in the UK. — Bloomberg