The Fall of Carillion and the Way Foward

The end of Carillion and the fabled construction marques it represented stands as a cold day in a hard industry.

My heart goes out to friends, colleagues and businesses affected by Carillion’s slow, then sudden fall.

In the aftermath it can be painful to watch politicians scramble, trying to grub political capital from this very human catastrophe, when in my view, the government should instead be engaging with industry in a long overdue introspection in the way construction is financed and procured in the United Kingdom.

In any case when a seismic event like this occurs, there are casualties. On the balance sheet they are unsecured creditors, in the real world they are all too often SME supply chain companies, shouldering the bad debt or collapsing under the burden.

So, what can be done to protect these suppliers and subcontractors who actually deliver the works? Credit insurance is the stock answer. However, this comes with a cost and these insurance providers tend to be ahead of the curve, often ‘de-risking’ by pulling cover when a faint breeze is detected. Although credit insurance may be part of the answer, it is not always a silver bullet; so, what else?

One solution is to ‘speak softly and carry a big stick’; ‘speaking softly’ to avoid unproductive displays of anger, engaging with your client and seeking to resolve issues with a level headed commercial focus; the ‘big stick’ acting as the suspension of work under the Construction Act for non-payment, managing the projects in a commercially robust manner, incrementally recovering due entitlement and most importantly, refusing to work under massively onerous terms by ensuring you sign a square deal in the first place.

It is all too common for contractors to take on projects without negotiating satisfactory terms, or conversely, for clients to let contracts without proper mechanisms, controls and securities, often leading to extremely damaging consequences downstream.

Here at A. Lamb Associates we are increasingly requested to get involved at the genesis of a project; representing clients and contractors in preparing and/or amending standard forms, bespoke contracts, drafting amendments or new clauses for obligations, securities, conditions and terms.

Our technical construction knowledge, combined with our commercial and extensive dispute experience, means that we are uniquely positioned to provide clients with this service, as we can often foresee pitfalls that lay ahead from onerous or seemingly innocuous provisions.

We develop authoritative, commercially focused strategies to eliminate or reduce risk and advise on developing opportunities in straightforward, practical terms. In our experience an investment at the earliest stage of a project pays dividends down the line.

We continue to strengthen our portfolio of contract drafting, vetting and negotiation and have recently provided these services to customers including; major pipeline contractors, regional construction contractors, multinational chemical companies, energy companies and a range of specialist contractors.

If you would like to discuss your requirements for these services, please contact our Regional Director, Byron Tyson, at the Kirkby Lonsdale office via email; byrontyson@alambassociates.com.