A continuing crisis

 

The pace at which things continue to develop around Carillion’s collapse is rapid, as is – rightly – the response from those organisations it concerns.

Whatever their reaction, the fallout is set to fundamentally change the relationship between the public and private sector in the commissioning of contracts, with reforms and a new regulatory landscape set to emerge.

With no end in sight, Carillion’s collapse and its wider implications are likely to be a dominant theme throughout this year. To offer just a snapshot, WA’s own insights clearly show the level of interest in the subject from across the board. In the last six weeks alone, there have been 383,000 mentions of Carillion on social and traditional media platforms, with 41 per cent negative in sentiment. This is compared with the significantly lower figure of 103,936 across the 18 months prior. MPs, policymakers and influencers have been particularly vocal on the issue. With a staggering 92 per cent of all mentions online by this group having taken place in the last six weeks, accompanied by 495 mentions of outsourcing by MPs and Peers since 15th January 2018, it’s clear this issue isn’t going away anytime soon.

Since the collapse was announced, the fallout has resulted in the launch of six different parliamentary, government and regulator inquiries into Carillion – an unprecedented number – with each bringing into question how fit-for-purpose the current structure of private procurement of public services is in the UK. The reach of these inquiries has extended further and deeper than most would have initially anticipated, as seen in the latest phase of the Business, Energy and Industrial Strategy (BEIS) Select Committee and Work and Pensions Select Committee’s joint inquiry last Wednesday, where consultants and investors were drawn into the frame.  At the same time, committees have not limited their lines of questioning to Carillion as an organisation, but have also been aggressively pursuing individuals deemed at fault, as well as increasing the focus on the sector at large, with Interserve, Persimmons and Capita all becoming frequent mentions in Hansard and media headlines alike. We can be sure it is not only the length and breadth of investigations that is making the Carillion collapse so compelling to spectators, but the warning signals they are consciously sending out to all those involved in public sector procurement.

Given the sheer number of on-going investigations and inquiries, recommendations to reform the regulatory environment are inevitable which will, in turn, change how the public-private procurement sector operates. Alongside this, the Labour Party’s calls to reform the market will continue to gain momentum and will likely influence the shape of any future reforms.

So what next? Our four key recommendations to businesses

With the issue gaining traction on a weekly and even daily basis, we’ve taken a look at developments over the last 60 days, and assessed what it means for organisations involved in private-public procurement contracts, and as a result, what action they should be taking to ensure they are best placed. In short, organisations should be preparing for the immediate and longer-term impacts the increased spotlight the Carillion fallout will bring to ensure they are in the most favourable positions to navigate, respond to and influence reforms, whilst at the same protecting personal and organisational reputation.

With everything in mind, we have put forward four key actions that businesses should be considering as immediate next steps:

  1. Engage with MPs and Peers involved in the inquiries to ensure regulatory reforms reflect the requirements of individual businesses. By proactively engaging with these MPs and Peers, businesses will be viewed by government as making a positive contribution to the future of the sector, positioning themselves as industry advisors to government, and influencing recommendations in committee reports, which are likely to be accepted as reforms.
  2. Initiate a dialogue with senior officials, backbench MPs and influential Peers who will be part of debating any reforms as recommendations emerge from committees and inquiries. This will enable both short and long-term leverage opportunities and open the door for on-going relationships.
  3. Getting on the front foot with communications to ensure businesses are equipped for any eventuality by devising an overall reactive and proactive communications strategy, including crisis mitigation and management.
  4. Using the opportunity to strengthen businesses’ position in the market by being opportunistic around their place in the sector as far as profiling success and individuals through thought leadership and executive positioning, strengthening organisations’ brand equity with decision-makers, media and industry at large. This could include garnering cross-industry support for reforms required, allowing organisations to own and drive the direction of debate, and take a long-term strategic and sustainable position.

WA’s Real Estate and Infrastructure team