Post-Carillion, UK recasts outsourcing approach

Bloomberg

The UK government has drawn up a package of reforms to improve the way public services are outsourced, after construction firm Carillion Plc became one of the biggest corporate casualties in British history this year.
Outsourcing firms, including Serco Group Plc and Capita Plc, will issue “living wills” over the coming weeks, Cabinet Office Minister David Lidington plans to say in a speech on Monday, according to an advance copy of his remarks. Living wills are plans to help with the dissolution of a company in the event of its collapse. Banks were also forced to create them in the wake of the 2008 crisis.
When Carillion failed, “we did not have the benefit of key organisational information that could have smoothed the management of the liquidation,” Lidington says in the remarks. “By ensuring conti- ngency plans can be quickly put in place in the very rare event of supplier failure, we will be better prepared to maintain continuity of critical public services.”
Carillion filed for liquidation in January after the government refused to bail it out, leaving almost 3,000 people out of jobs, and 30,000 Carillion suppliers and subcontractors with 2 billion pounds ($2.6 billion) in unpaid bills. The situation highlighted a litany of other problems with outsourced public contracts and buoyed opposition lawmakers in their calls for services to be brought back in-house.
In June, Lidington said critics of outsourcing had been too quick to use Carillion as a reason to renationalise some services and bring others back under state control, claiming it would cost about 176 billion pounds if the government were to do so. But he said the collapse had “crystallised issues” that needed to be addressed.