Carrillion ?

[observer]

Forgive my ignorance, but is it usual to award contracts to a huge corporation, that apparently claims expertise in a multiplicity of areas, from building Hospitals, transport infrastructure to delivering school meals ?   Would it be true to suggest that such a huge organisation, would merely be a corporate tenderer for HMG contracts, that are then sub-contracted out to smaller firms ?   In which case. would it be preferable for HMG to have a National(ised) Building Organisation, that would tackle such contracts and employ relevant sub-contactors in the first place ?   

[Davy51]

I think the Carrillion system is better suited to creating fat cat directors & bloated shareholders while having the advantage of being able to settle its debts on the taxpayer. Even a short time on the naughty step would be nothing for the directors considering the money they will make.

Didn't we used to have the Crown Agents who ran this sort of sub contracting of government construction schemes ?

[Confused52]

I am not sure it is true that they only sub-contract to smaller firms. The thing which is constant is the type of client, i.e. Government. This used to be the MO of firms like GEC who dabbled in anything that had electrical content where the end customer was a government agency, such as the military or Post Office. The attractive thing was the Cost Plus contracts which guaranteed a return. They all disappeared and so did GEC. Government started to outsource which had the effect of reducing Civil Service numbers and Pensions. The regular revenue of government service contracts and a customer which cannot go bust was irresistible. The companies like Carillion seem to either form their own subsidiaries to address the new revenue stream or form a JV if technical knowhow is needed. Cleaning, School Meals and general service work is something they can set up on their own but scale reduces costs so the government favours building up the scale in those enterprises. I suspect those JVs caused problems for Carillion since the partner can take over and remove the future value of the JV's revenue stream making administration impossible and leading straight to liquidation.

Given that  the point is to take the workers out of civil service type conditions the answer cannot be to nationalise them again, which is why even Corbyn said no to that. The issue with the building side is surely that the risk and the capital needed to build projects is taken off the Public Sector Borrowing Requirement until the project is complete and there is then a service revenue flow (such as a hospital) to pay back the capital from a fraction of its running costs. Given that the expertise to build these things is in the Private Sector what is to be gained by a National Building Organisation which would just sit between the Gov Dept. and the Contractors. There is a lot of work done by the big companies themselves in design, project management and financing that would have to be done by the contractors or the New Organisation and the skills are reused better by contractors in reality.

The simplistic analysis above breaks down when the contractor do work in jurisdiction which are unpredictable or in currencies that are unstable relative to sterling which seems to be what happens to sterling. Then the sterling paid work has to bail out problems with the export stuff and if the ratios are wrong, it is curtains. In the past the foreign export construction jobs were indeed done by Crown Agents but they were originally in Colonies where there were suitable guarantees. For unstable areas there is insurance in the form of Export Credit Guarantees but I think they are limited and may be expensive and reduce profitability.

[observer]

So basically, we're back to the issue of the Public Sector Borrowing Requirement; which Brown quoted when he off loaded Council Housing to Housing Corporations. Might mean a lot to an accountant, but very little to the now homeless, the work force or the tax-payer who picks up the tab for the adventures of these private sector cowboys.  Nationalisation isn't a Socialist construct per say;   during WW1 Lloyd- George basically nationalised the war effort in order to out produce the enemy in weapons of destruction - needs must etc. It seems either way, the tax-payer ultimately picks up the tab, so let's pick the option that provides a satisfactory and less precarious end result.      

[observer]

Listening to the Party political point scoring in Parliament, you could be forgiven for thinking that only the Tories are to blame for this mess; but the reality is it all began under Labour, with a third of such contracts issued by the Bliar/Brown regime, followed by another third under the Cameron/Clegg regime and the final third by the present Tory Gov. So instead of the pots calling the kettles, it may be preferable if they got together and came up with solutions for the future.      

[Davy51]

Well apparently the best of the outsourcing  is yet to come. A complete renewal of armoured cars & troop carriers for the British army by a German firm. How many jobs could that provide for the British workforce post Brexit ?

[asperity]

Why does the British Army need armoured cars and troop transports? I thought it was being disbanded

[observer]

     Well we've already been invaded, so I guess they're redundant.   

[Davy51]

There was an article in the paper a few days  ago saying they are to replace the present fleet &  will only cost £4 million  each !

[Togger1]

On 15/01/2018 at 7:31 PM, observer said:

Forgive my ignorance, 

No.......

[observer]