Government questioned over big contracts given to failing firm

Opposition figures are asking why the UK Department for Transport, headed by transport minister Chris Grayling, awarded major contracts to Carillion even after it admitted it was in trouble.

Labour and Liberal Democrat spokespeople claimed a series of major contracts including for the UK’s planned high-speed railway, HS2 (pictured), should not have been given to Carillion in light of repeated profit warnings.

Former national infrastructure committee chairman Andrew Adonis has weighed in as well, questioning Grayling’s due diligence and judgement.

On 10 July last year Carillion revealed its chief executive was stepping down as more than $1bn (£845m) had to be set aside to cover problem contracts at home and abroad.

It looks as if Chris Grayling may have been bailing out Carillion as well as Virgin– Andrew Adonis, former National Infrastructure Commission

But just a week later on 17 July the Department for Transport awarded the Carillion joint venture CEK, consisting of Carillion, Eiffage and Kier, two major contracts for HS2, together worth £1.34bn.

The awards were part of the first big tranche of HS2 contracts handed out, together worth £6.6bn for phase 1 of HS2 linking London and Birmingham, due to open in 2026.

Then on 6 November Carillion announced it had won two contracts from Network Rail, the public company reporting to the Department for Transport that owns and operates Britain’s tracks, bridges and signalling infrastructure.

One was a £62m contract to upgrade track and infrastructure between London to Corby, and the other was a £260m contract, with a joint venture partner, to complete the electrification of the London-Corby route.

Less than two weeks later, on 17 November, Carillion issued its third profits warning in five months and said it would breach its debt covenants, sending its share price even lower.

The government’s opponents have zeroed in on the failure of Grayling’s department to spot the risks.

"It has been clear for months that Carillion has been in difficulty but the Government has continued to hand over contracts to the company even after profits warnings were issued," said Jon Trickett MP, Labour’s Shadow Minister for the Cabinet Office, in a statement on Saturday.

Liberal Democrat leader and former business secretary Vince Cable took to Twitter to make the same point. "Why did co get public sector contracts for @HS2ltd @networkrail Corby-London electrification #defence #schools after profit warning showed high risk? Too big to fail and failed," he wrote.

Grayling, who kept his post as transport minister after the recent cabinet reshuffle, came under pointed fire from Andrew Adonis, who resigned as chairman of the government’s national infrastructure committee on 29 December partly in protest over the minister’s decision to bail out Stagecoach and Virgin on the East Coast rail franchise.

"It looks as if Chris Grayling may have been bailing out Carillion as well as Virgin," he said, reports newspaper The Guardian.

"[Carillion] got HS2 contracts from him after their troubles emerged in the summer, raising big questions about his due diligence and judgment."

Whitehall insiders have said the HS2 contracts had been "stress tested" to ensure that if one contractor pulled out, others in the consortium were able to fill the gap, the Guardian reported.

Image: Render of a the UK’s planned high-speed railway, HS2, in action by Arup

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  1. another brainless blunder

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