Fall out from Carillion requires careful consideration

With the news of Carillion’s liquidation, a number of questions arise.

From a procurement professional’s perspective, what happens to the contracts will be of paramount importance. It is unlikely to be a simple case of novating the contract to a new provider.

Liquidation usually results in the right to terminate the contract. However, this may not be the course of action you want to follow if you are part way through a contract.

In considering your options, careful consideration should be given to the Public Contracts Regulations 2015, in particular whether there may be grounds to award an interim contract, or whether the provisions of regulation 72 could assist (i.e. whether it would be possible to argue that awarding a new contract to a new provider is not a material variation in these circumstances). These possibilities should be considered carefully, as always, the devil will be in the detail.

For current and future processes, you should also consider what lessons can be learnt from Carillion’s position. For example, what financial assessments and information can be taken into account at the selection stage? Also should you be more vigilant in terms of the potential for abnormally low tenders?

What is clear is that you should carefully consider the position so as to avoid the risks of a procurement challenge for a failure to comply with the Public Contracts Regulations 2015.

We are happy to advise you on these procurement issues.

Our specialist teams can also advise you on:

• Your rights and options in respect of terminating the contracts;
• Making direct payments to sub-contractors;
• Appointing replacement contractors;
• Enforcing performance bonds;
• Making sure you have the collateral warranties you need to obtain protection from others in the supply chain; and
• Dealing with the insolvency practitioners.

Please contact: Andrew Daly, Crispin Pettifer or Richard Nolan.