County council counts the cost of the Carillion collapse

Oxfordshire County Council is carrying out a detailed review of the costs and liabilities related to its properties following the Carillion collapse so that a robust financial plan can be considered by councillors in the autumn and included in the council’s budget.

Carillion provided services on behalf of Oxfordshire County Council including maintenance of council buildings; property services, and building work such as school extensions.

Members of a county council committee will next week consider the process of assessing costs, liabilities and risks to assure themselves that the review of the county council’s properties is thorough and comprehensive.

Oxfordshire County Council made a net payment of £10.6m at the end of December 2017 to Carillion to cover work already completed as part of the final settlement to end the contract with the company, limiting any future financial liability.

However, the costs of dealing with ongoing construction and property maintenance problems following the Carillion collapse have not yet been calculated but are expected to be “very significant”. Surveys to assess defects in buildings including schools are continuing across the county council’s properties.

Compliance with health and safety requirements is also being considered, with any safety issues that emerge being dealt with quickly. One of the problems that came to light after Carillion collapsed was that records of building assessments were not kept properly. This means that building maintenance requirements are emerging for the first time.

Councillor Nick Carter, chairman of the Audit and Governance Committee, said:

“Like many other public bodies, Oxfordshire is having to pick up the pieces left after the collapse of Carillion. We need to know the real costs of getting our properties in good order so the council can plan and budget properly.

“To minimise the impact to Oxfordshire tax payers, it is vitally important that no stone is left unturned when reviewing the potential costs and liabilities. Councillors on the audit committee will want to satisfy themselves that there is a proper process in place, with health and safety made the number one priority.”

Where possible, unfinished work by Carillion as the council’s property maintenance and building contractor has restarted, with new contractors in place.

The hardest cost to quantify are ‘latent defects’ – problems that emerge after building work is completed that would normally be dealt with as part of the contract with the builder. With some – but not all - Carillion businesses in liquidation, claiming for the cost of these defects is not straightforward, and may lead to legal action.

The county council is surveying the structural condition of buildings and does not include the general condition of buildings, including schools, which schools manage themselves through their delegated budget.

Alexandra Bailey, Director of Capital Investment and Delivery, said:

“The collapse of Carillion has created financial and legal difficulties related to our properties, which we are working through in detail. We don’t yet know what the total cost will be but I do know it will be very significant.

“I know this uncertainty is having an impact on service users and staff who use our buildings and I am sorry about the disruption and uncertainty this has caused. We have no choice but to go through each issue systematically and come up with a long-term recovery plan.

“Where we can get building work moving again we have, and our first priority is always to deal with health and safety issues.”

Many councils and other public service organisations were hit by the collapse of the Carillion, and Oxfordshire County Council believes that those organisations need to band together to deal with the government and the company’s liquidators.

The county council is now gathering support for a national stakeholder event in October organised jointly with the Local Government Association to consider opportunities for joint action to minimise the costs to local council tax papers.

“This is a national issue and we would like to see a national response to ensure that the public sector does not bear the brunt of this corporate failure,” said Alexandra Bailey. “The cost is likely to be significant, but the county council’s financial position is resilient and we can manage the impact on our budget over the long term.

“We are doing everything we can to minimise the costs and taking a robust legal position with the liquidators to ensure that local tax payers do not bear an unfair burden following Carillion’s collapse.”

The county council’s Audit and Governance Committee meets on 25 July to review the process for estimating the council’s financial liabilities that emerged following the collapse of Carillion. The council’s Cabinet is expected to receive an assessment of the costs in the autumn, along with a long-term plan for dealing with the problems identified in surveys.