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Contractors challenge Housing Executive's silence on Carillion

3 Aug 18 The Northern Ireland Housing Executive is refusing to offer any explanation as to why it handed Carillion Energy Services a £133m contract last year, claiming the issue is ‘commercially sensitive’, despite Carillion having gone out of business seven months ago.

Northern Ireland’s Housing Executive let a £133m contract to Carillion Energy Services in 2017 to upgrade energy systems in Northern Ireland’s housing stock.  Following the collapse of Carillion the contract was novated to Engie.

The Specialist Engineering Contractors’ (SEC) Group, representing the largest sector in Northern Ireland’s construction industry, is seeking answers from the Northern Ireland Housing Executive (NIHE), 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 giving the contract to Carillion.  Electrical Contractors' Association regional manager Alfie Watterson, speaking on behalf of SEC Group NI, said that NIHE had refused to provide the requested explanation because the information was ‘commercially sensitive’. 

He said: “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 25th November 2016 when a decision was made to divide the energy upgrade work into six lots rather than the previous three on which it had gone out to tender.  The larger consolidated lots were said to have had ‘a negative impact’ on the tender.

The Constructionline prequalification organisation is also coming under fire. Its category values were used to assess Carillion’s financial standing: Carillion passed, despite being in a financially precarious position.  Under Constructionline’s system, suppliers are given a value called a notation which takes into account annual turnover, average values of references obtained and net assets.

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Alfie Watterson called for Constructionline’s formula for assessing financial standing to be reviewed. He said: “The 2016 accounts for Carillion Energy Services – their last reported accounts – revealed a £16m loss on turnover of £42.8m. Carillion was not in any position, financially speaking, to take on a £133m contract.”

But Mr Watterson reserved his greatest criticism for the 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.”

He added: “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,” he said.

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