Confusion reigns on local government contracts in the wake of Carrillion’s collapse

What impact will Carillion's liquidation have on local government?

The collapse of Carillion leaves too many unanswered questions for local councils, schools and academies. APSE ( Association for Public Service Excellence )  has pressed the Cabinet Office and DFE to clarify if Minister David Lidingston’s assurances on staff payments and continuity on public sector contracts extends to those in Local Government.

Speaking about the collapse APSE Chief Executive Paul O’Brien said “Whilst the Ministerial statement refers to employees turning up to work to continue to work on public contracts, and the Minister has offered a radio interview promising that public contract workers will still be paid the statement only refers to the 450 ‘Government contracts’. This leaves a huge question regarding those contracts with local councils or with individual schools and academies

O’Brien added “ Whilst obviously we are very concerned for all workers  who potentially face job losses, and many without redundancy protection, there are also service users who need to be protected; these include children using school meals services and many thousands of pupils and teachers in school premises where repairs and maintenance services may be within a Carillion arrangement through PFI or contracts entered into under the Building Schools for the Future Programme”.

Whilst Government is able to directly intervene in the contracts where it is a contract partner the situation is less certain  for public contracts awarded by other public bodies. In the case of schools the fragmentation of schools, and school support services like facilities management, means there is a complex set of contracts in operation, where the local authority may not have direct responsibility but will nevertheless be expected to act to mitigate the impact of Carillion’s collapse.

APSE is calling upon the Cabinet Office , DFE and DHCLG to clarify  if they will expand the protections seemingly offered on Government contracts to both local councils and localised  public service contracts. APSE is also calling on Government to allow for transitional relief schemes to be put in place which would enable contract continuity in the short term, allowing for local councils if necessary to take over the provision of essential local services through contract novation or other mechanisms to allow for service continuity.         

APSE has previously written about local government Insourcing and is currently working on a third report. Insourcing is a growing phenomenon whereby public contracts are brought back in-house. APSE has also warned that large public contractors are becoming too big to fail – requiring the use of public funds to bail-out contracts or companies in the event of contractor failures. Risk is not effectively transferred and this adds cost to the public purse. APSE has long argued that it is essential that capacity is retained in the public sector to ensure  that in the event of contract failures there is sufficient ability to intervene effectively in markets.

ENDS

For further information or to arrange an interview  please contact Mo Baines on [email protected]