MPs call Carillion bosses “fantasists” over Qatar contract

Construction disputes are rarely straightforward, but on the strength of a letter, MPs investigating the collapse of Carillion have sided with its former Qatari client, Msheireb Properties, calling Carillion bosses "fantasists" and accusing its former chief executive of "chasing a pot of gold".

Once again Carillion’s directors appear to have shut their eyes and ears to the real problems at the company and failed dismally to take meaningful action to avert its tragic collapse– Rachel Reeves, BEIS committee chair

The Work and Pensions-Business, Energy and Industrial Strategy (BEIS) joint committee today published the letter from Msheireb, the Qatari developer Carillion directors said owed them £200m, and hadn’t paid for 18 months, when Carillion was forced into liquidation on 15 January.

The letter disputes claims made by former chief executive Richard Howson and former interim chief executive Keith Cochrane in a hearing on 6 February, and MPs have ruled in Msheireb’s favour, with committee co-chairs Frank Field and Rachel Reeves delivering scathing rebukes.

Howson told the committees that Msheireb owed Carillion £200m when he was removed as CEO in July 2017. Claiming that Carillion’s accounts suggest the amount owed was "actually £72 million", MPs note that Msheireb "entirely disputes" the statement, instead stating that Howson was "misleadingly" referring to "the value of construction work remaining to be completed" plus "the value of claims relating to further delays".

Msheireb countered that Carillion owed it "a similar amount of money", including £47m in liquidated damages.

In its letter Msheireb also called Carillion’s performance on the project "generally poor".

"In particular, the works were not completed in a timely manner and, as a result of delays caused by Carillion’s resourcing, financial issues and problems with their supply chain, Carillion became liable to pay substantial liquidated damages for delay under the Contract.

"The liquidated damages Carillion is due to pay are QAR 237 million (or approximately £47 million) as a result of delays to the progress of the work."

Work & Pensions Committee chair Frank Field MP was entirely convinced.

"This extraordinary exchange reinforces the impression that the upper reaches of Carillion was stocked with fantasists," he said, adding: "It takes a special kind of optimism…to classify money one hopes to earn in the future, on a challenging project, as money ‘owed’ to you. He cannot tell the difference between money he’d like to be paid, he wishes would be paid, and money that is actually owed to him."

BEIS committee chair Rachel Reeves (pictured) was equally scathing.

"The Carillion directors’ litany of excuses for the collapse of the company is fast unravelling," she said.

"While spiralling debt problems and failing contracts signalled the alarm to almost everyone but Carillion’s directors and auditors, their former chief executive was jet-setting off to Qatar to chase a pot-of-gold that may never have existed.

"Once again Carillion’s directors appear to have shut their eyes and ears to the real problems at the company and failed dismally to take meaningful action to avert its tragic collapse."

Image: BEIS committee chair Rachel Reeves MP

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  1. This entire calamity can be attributed to taking on a large complex project by an under capitalized company which, unfortunately, is all too common in the construction industry world-wide.

    In addition the cost estimate and time schedule appears to have been faulty, and the contract terms must have been poor in regard to dealing with owner-incurred design changes and their repercussion to the time schedule and resultant cost.

    Not paying sub-contractors first prior to paying yourself is also a common ethical problem which separates quality contractors from “also rans”. [I am a retired Civil Engineer who spent 45 years in iternational construction with top notch firms.]

  2. What is the real role of auditors and the Finance Director in this saga? Surely that the cracks did not appear suddenly, there must have been some rumblings along!!! How is it possible that Directors continued to trade whilst aware that there were clear signs of trouble ahead. Is this the proverbial building castles or Carillions in the air?

  3. How do incompetents get high profile positions .If a small company did what Carrillion did they would be facing a police prosecution not MP’s. One rule for rich villains, one rule for poor She’s and Sub it’s.

  4. Since when have MPs, rather than qualified arbitrators/judges, been experts in construction disputes?

  5. I agree with Peter Simon’s statement. It is a matter of fact.
    I have one question: where is the team on site who are dealing with day to day affairs of the project. In my life’s experience, a grand project like this should have an armada of site management team with at least 20% of them of older experienced colleagues. The daily/weekly/monthly/annual reports should have told something.

  6. Having been employed by Carillion on a Crossrail project as a consultant it rapidly became clear that cost management was not a priority. Poor accounting, high bonus rates for out of hours working and a lack of adherence to budgets were in evidence.

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