Last year Northern Ireland’s Housing Executive let a £133 million contract to Carillion Energy Services to upgrade energy systems in Northern Ireland’s housing stock. Following the collapse of Carillion the contract was novated to ENGIE.
The Northern Ireland Specialist Engineering Contractors’ (SEC) Group – representing the largest sector in Northern Ireland’s construction industry – invited the Housing Executive (NIHE) to justify letting the contract to Carillion given the losses incurred by firms in Carillion’s supply chain. One Northern Ireland SME lost £150,000.
Using the Freedom of Information Act SEC Group asked NIHE to explain its reasons for having given the contract to Carillion. Speaking on behalf of SEC Group NI, Alfie Watterson said that NIHE had refused to provide the requested explanation since the information was “commercially sensitive”. He added:
“I simply do not understand this response since Carillion has been in liquidation since 15 January and, therefore, will have no interest in this information being made public. NIHE’s refusal will only serve to arouse suspicions that there is something to hide.”
The NIHE did provide minutes of a Board meeting held on 25 November 2016 when a decision was made to divide the energy upgrade work into 6 lots rather than the previous 3 on which it had gone out to tender. The larger consolidated lots were said to “have had a negative impact on this tender”.
Constructionline’s Category Values were used to assess Carillion’s financial standing; Carillion passed. Under this system suppliers are given a value called a notation which takes into account annual turnover, average values of references obtained and net assets.
Mr Watterson called for Constructionline’s formula for assessing financial standing to be thoroughly reviewed:
“The 2016 accounts for Carillion Energy Services – their last reported accounts – revealed a £16 million loss on turnover of £42.8 million! Carillion was not in any position, financially speaking, to take on a £133 million contract.”
But Mr Watterson reserves his greatest criticism for the nonchalant attitude of the NIHE towards the supply chain:
“Given that NIHE knew that Carillion would sub-let most of the work, its answers to the FoI Act questions showed a complete lack of interest in the treatment of Carillion’s supply chain. Given that NIHE is a Centre of Procurement Expertise this is unacceptable.”
“The guidance provided by the Central Procurement Directorate (CPD) required NIHE to satisfy itself that suppliers would be treated equitably and paid within 30 days.”
NIHE was asked for information regarding Carillion’s subcontract terms and conditions. NIHE responded: “There is no requirement for [NIHE] to assess this information”. Neither did NIHE hold any information on Carillion’s subcontract payment terms. Mr Watterson said that this response showed either that NIHE was ignorant of CPD’s guidance or deliberately chose to ignore it:
“The available guidance makes clear that NIHE should have demanded to know the terms and conditions of Carillion’s subcontracts to ensure that they were no worse than those under the main contract and that payments would be made within 30 days”.
SEC Group NI is already campaigning to extend project bank accounts to all public sector construction industry services contracts. These enable all supply chain firms to be paid from the same “pot” without the monies being used and abused by the large contractors. It is also seeking protection for retention monies so that they are ring-fenced within a trust arrangement.