Government must make reforms to avoid another Carillion

The government has yet to address the problems that led to the collapse of Carillion two years ago says a new Institute for Government report – which warns that the Johnson government risks ‘another Carillion’ if it doesn’t get behind the reforms put forward after the firm’s liquidation.

When Carillion collapsed in 2018 it held more than 400 public sector contracts, but the government has not consistently taken up the Cabinet Office’s new guidelines to the way such contracts are designed, awarded and managed. The new IfG report finds that departments regularly ignore these sensible guidelines around publication of commercial ‘pipelines’, about how risk is allocated between government and suppliers, and how bids for contracts are selected. This means that the government is still signing risky contracts which may well collapse.

Those guidelines also do not apply to local government and public bodies, including the NHS, despite those organisations being responsible for over £100bn of procurement spending.

Since Carillion, the Cabinet Office has trained 8,000 officials on how to implement its new guidelines and has won support from major suppliers, but the Johnson government must do more if it is serious about changing the way it handles big projects.

The report calls on the government to:

• Name a Cabinet Office minister who is responsible for improvements in outsourcing.
• Use this summer’s spending review to give the Cabinet Office funding to support and scrutinise contracting by departments.
• Extend contracting training to local government, the NHS, and other public bodies.
• Equip the new Audit, Reporting and Governance Authority with the statutory powers recommended by the Kingman review, including to force changes in company accounts rather than applying to court to do so.

Tom Sasse, IfG senior researcher and report author, said:

“Carillion was a wake-up call, with its collapse showing where a careless approach to outsourcing can lead. The government must implement serious reform if it is to secure services that are reliable, high-quality and value for money – and avoid the prospect of contractors collapsing in future.”

Notes to editors

1. The Institute for Government is an independent think tank that works to make government more effective.
2. For more information, including data to reproduce any charts, please contact press@instituteforgovernment.org.uk / 0785 031 3791.