Carillion: Oxfordshire County Council agrees exit deal after company collapse
County Councils terminates services contract
£10.7m final payment had already made in December for work completed
Carillion staff to transfer to council employment and services continue normally
Oxfordshire County Council has formally terminated its contract with Carillion LGS Limited today (Monday), effective from 1 February 2018, following the collapse of the parent company last week. This brings forward the already agreed end of the contract set for the end of June 2018.
Oxfordshire County Council made a net payment of £10.65m to Carillion to cover work already completed as part of the final settlement to end the contract with the company.
Carillion provided services on behalf of Oxfordshire County Council including school meals and cleaning; maintenance of council buildings; property services, and building work such as school extensions.
If Oxfordshire County Council had not struck the exit deal early and made the payment in December, weeks before liquidation, we would now be facing the prospect of lengthy litigation to end the contract.
Cllr Lorraine Lindsay-Gale, Cabinet Member for Property, Cultural & Community Services, said:
“We brought the process forward and legally terminated our contact and will be taking over those services to ensure continuity. Carillion’s financial problems were not the original reason we wanted to end the contract. But as the scale of the company’s problems became apparent we are very glad we ended the contract when we did.
“The reality is that if we had not ended the contract and settled with the liquidators, we would now be tied up in lengthy negotiations to end our involvement with the company. This early exit deal means we can get on with finding better ways to deliver services that Carillion provided.”
The parent company was put into liquidation on Monday 15 January.
Carillion staff in Oxfordshire County Council’s maintained schools who contracted their services via Oxfordshire County Council will be transferred to Oxfordshire County Council under staff transfer arrangements known as ‘TUPE’, and services will continue as normal.
Ensuring business as usual
The ten-year contract was signed in 2012. Since then, the council’s policies and strategies – particularly in relation to property and its estate – have evolved in such a way that the tie-up with Carillion makes less commercial sense now than it did in 2012.
In summer 2017, the county council announced that it had agreed with Carillion to end parts of the contract, leaving only facilities management (maintenance, cleaning and school meals) which was due for a review.
Following that review, we agreed with the company to end all remaining parts of the contract by 30 June 2018, and a payment was made to Carillion to settle all outstanding amounts due in relation to completed construction contracts.
Services previously provided by Carillion to the county council will continue through a mix of bringing staff in-house (e.g. school meals, cleaning); continuing with suppliers (mainly catering), and working with existing sub-contractors (mainly construction and property services).
Payments to Carillion staff and suppliers
We have received assurances from PwC that Carillion and sub-contractor staff and suppliers will be paid through PwC until 31 January and the relevant Carillion and sub-contractor staff will then become Oxfordshire County Council staff. Staff costs and payments to sub-contractors from 1 February 2018 that would have previously been paid via Carillion, will then be paid directly by the county council.
The county council will have paid approximately £148m to Carillion since 2012. Like every other Carillion customer, the county council is now working out the most cost-effective way to complete work left unfinished by Carillion. The county council will now take over direct responsibility for commissioning future construction work and service delivery.
County council officers are reviewing the uncompleted works under the Carillion contract and talking to sub-contractors about the best way forward.
Carillion sub-contractors and suppliers will be financially exposed to the collapse in Oxfordshire, as is happening across the country. We are establishing a process to assess, on a case-by-case basis, the impact on companies in the Carillion supply chain involved in providing county council services such as building maintenance.
“We recognise the significant impact on local companies working for Carillion that may be owed money and hope that work can continue as soon as possible. We are very grateful to Carillion staff and suppliers for helping us to deliver essential services in the short term and now want to work closely with contractors and suppliers on a longer-term basis.” said Cllr Lorraine Lindsay-Gale.