RIBA Executive Director Adrian Dobson says:
The Carillion collapse shows the need to rethink how we procure and manage public sector contracts.
The RIBA has voiced concerns about current procurement processes, including pre-qualification questionnaires (PQQs) and framework agreements; for although these are intended to support fair bidding, they actually restrict competition and create barriers for small businesses entering the market. Standard PQQ’s tend to bias selection in favour of larger multi-disciplinary suppliers. In architecture this might be requirements to have three built projects of a similar type, high turnover or PI requirements and multiple accreditations.
This leads to a reliance on a small pool of large companies such as Carillion; narrowing the talent pool and concentrating risk in too few hands. Smaller business, including architects, are often restricted to being tier 2 and 3 sub-contractors who are then particularly vulnerable to overhead financial collapses of this kind, where the cashflow crisis gets passed down the supply chain.
Carillion has around 20,000 workers in the UK, but there will also be a vast impact on the many sub-contractor firms that work with Carillion, including architects. The last significant bankruptcy in construction was ROK in 2010, which we understand had annual revenue of £715 million compared with Carillion’s £5,200 million; a huge difference in magnitude. The government has announced it will be covering Carillion’s costs on public sector service contracts to ensure that public services are not interrupted. That still leaves public and private sector construction work left in uncertainty and this needs to be clarified by the Government and the liquidator as soon as possible.
We will continue to lobby government for a new approach to procurement. We urge any members who are concerned about public or private sector contracts with Carillion to email email@example.com.