Government still accepting bids from Interserve despite Carillion-style woes

UK government clients are still accepting bids from troubled construction and services giant, Interserve, despite its financial fragility, officials have told the Financial Times.

They do not view the company as another Carillion, its much smaller rival that collapsed in January, and believe that banning bids from Interserve would breach procurement rules.

Yesterday Interserve revealed it had won a £25m construction contract at the Prince Charles Hospital in Merthyr Tydfill, Wales (pictured). Funded by the Welsh government, the project is part of the hospital’s £36m redevelopment.

"Public sector procurement rules require that bids are evaluated based on specific requirements and selection criteria," a Cabinet Office spokesperson told the FT. "A blanket ban on a supplier bidding for government contracts would not be lawful."

Shares in Interserve, whose UK headcount doubles that of Carillion before its demise, were today slowly climbing out of the hole they fell into Monday, when the company said it had entered a new round of talks with creditors over a rescue plan. 

Fears spiked in late November when the company warned that its debt mountain could grow to £650m, dwarfing its current market capitalisation of just £17m. 

Like Carillion, Interserve’s liquidity has been hit by problem construction contracts, in its case, waste-to-energy plants. Shares plunged to a 30-year-low earlier in November when it emerged that a £145m waste-to-energy plant in Derby, England had missed another handover deadline. 

As the FT notes, government was criticised for awarding Carillion £1.3bn of new contracts after the £845m black hole in its finances was revealed in July last year.

"It is scandalous that taxpayers’ money has been put at risk once more," said Jon Trickett, opposition Labour Party’s shadow minister for the Cabinet Office, reported the FT.

However, one Cabinet Office adviser told the FT that Interserve’s contracts would be more easily transferable to other outsourcers if it collapsed, saying it was "because they are less complicated than Carillion’s".

Image: Interserve this week won a £25m construction contract at Prince Charles Hospital, Merthyr Tydfill, Wales (From the website of the Cwm Taf University Health Board)

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