MPs have launched a formal inquiry into the Government’s public-private contracts in the wake of the Carillion collapse - despite claims that the civil servant in charge of the project ‘played a blinder’ in protecting the taxpayer.
The Commons Public Administration and Constitutional Affairs Committee (PACAC) announced a probe into the way the public sector makes decisions about ‘outsourcing’ of key services, including the risks of handing multiple contracts to a single firm.
Committee chairman Bernard Jenkin said that the failed construction giant, which went into liquidation on Monday, showed that “we need to ask if the rules on oversight and accountability of public services need to change”.
The inquiry was announced as the committee grilled Cabinet Secretary Sir Jeremy Heywood and Cabinet Office permanent secretary John Manzoni (pictured above) over the decision to award further contracts to Carillion after it issue a profits warning last July.
And in a separate session with MPs, Cabinet Office Minister David Lidington agreed: “I think there is a case for the Government to take a fresh look at the procurement process”.
Lidington stressed the case proved the risk of PFI deals was borne by the private sector and no taxpayer bailot had been paid.
He also said it was possible that the official receiver or pensions regulator could impose “sever penalties” on former Carillion bosses who took big pay-offs since quitting the firm last year.
Manzoni revealed that one Government official, a part-time “Crown commercial representative” who acts as a contact with big firms, was “rotated off Carillion in or about the summer time last year”.
But he stressed that another senior civil servant had monitored effectively the contracts held by the company, ensuring “in almost all cases” join ventures were agreed so another firm could step in should a collapse occur.
“The horsepower has been provided by the full-time Strategic Partnership Manager for Carillion, who has played a blinding role actually in this particular circumstance,” he said.
When Labour MP Paul Flynn asked if that meant the civil servant involved had had their “eyes covered”, Manzoni replied: “[Blinding as in]’ ‘very good’…She’s done a really good job over the course of the last seven months.”
Manzoni – a former BP boss brought in to Whitehall to bring commercial expertise to the civil service – played down claims that the procurement system was at fault and said companies came and went.
“Companies fail and succeed and we need to accept some of that will happen. In many ways this is the failure of a private sector company. It failed to reach agreement with its lenders in the final analysis,” he said.
“Some wheel is going to come off sooner or later somewhere in the system, but this is a very, very complex structure. I believe the structures we’ve put in place, and the lessons we’ve learned in the past, have put us in reasonably good stead for this,” he tells MPs.
The Government had told the official receiver that “our main aim is the continuity of public services”, Manzoni added. He stressed that continued payment for employees was a priority and there could be an extra cost as a result. “There will be a pace versus price debate,” he said.
Heywood added that while Carillion’s collapse was “no doubt a bad outcome for the country”, Manzoni and his team had “done weeks and weeks of contingency planning” across 450 public sector contracts.
He said that 10 years ago the civil service “wouldn’t have known where to start”.
“In this case had we had this situation a couple of years ago, the outcome would have been significantly different and probably significantly worse for the public sector than it is today,” Manzoni said.
Both Manzoni and Heywood said that the real reason they and ministers had not been able to withdraw contracts from Carillion after last July lay with strict EU rules on competition.
“We have to be very even handed about this. Just because the company has given a profit warning, we can’t say that ‘we won’t touch that’,” Manzoni said.
“We can’t do that under European procurement rules. We have to be completely open and clear under our procurement rules.”
Jenkin asked: “Why can’t you say to a company with profit warnings, ‘We think you should take a holiday from bidding for government contracts’?”
Manzoni replied: “Because it’s against the law.”