Sourcing public services - lessons learned from the collapse of Carillion

Public Administration and Constitutional Affairs Committee inquiry
Report type
Research and reports
Issue date
27 Feb 2018
Key findings

This document will detail the following set of policy recommendations to address specific issues related to the outsourcing of public services, with recommendations applicable to both national policy makers but also commissioning and procurement practitioners across the public sector.

  • Review of public service outsourcing
  • Decision-making
  • Standards of transparency
  • Standards of accountability
  • Accounting practices and cost appraisal
  • Employment terms and protection for staff delivering public services

The TUC welcomes this opportunity to feed into a timely and crucial debate in the wake of the collapse of Carillion.

The compulsory liquidation of the company has created an uncertain future for the tens of thousands of workers and sub-contractors employed on contracts that Carillion held across public services, construction and transport infrastructure. And it also an anxious time for the clients, public bodies and end users that commission and rely on those services, as the official receiver seeks to find replacement contractors and joint venture partners to take over service and maintenance contracts and to complete construction projects.

The collapse of Carillion can be attributed to a range of factors, many resulting from the strategy employed by the company itself. Carillion became over-stretched, highly leveraged and, through under-bidding, left itself highly exposed to adverse outcomes on a small number of construction projects – risks exacerbated by aggressive accounting, mismanagement of pensions and prioritisation of dividend payments at all costs.

But there are questions too that go to the heart of the outsourcing culture that pervades our public services. The collapse of Carillion is part of a series of high-profile failures involving private companies delivering public services, including:
• early withdrawal of the Stagecoach/Virgin franchise on the East Coast Mainline;
• Capita’s chaotic performance with a national primary care support service for GPs;
• failure of Coperforma to provide effective non-emergency passenger transport services in West Sussex NHS;
• SERCO walking away from GP out of hours contracts;
• increasing performance problems in outsourced probation services.

Each of these areas has experienced unique issues but there are also commonalities. Each can be characterised by the failure to deliver on promised savings/revenue, under-performance against contract requirements and ineffective risk transfer, with the government and the taxpayer having to step in where services fail.