{"id":517050,"date":"2025-03-25T00:01:46","date_gmt":"2025-03-25T00:01:46","guid":{"rendered":"https:\/\/www.constructionnews.co.uk\/?p=517050"},"modified":"2025-03-25T11:22:27","modified_gmt":"2025-03-25T11:22:27","slug":"government-sounded-out-replacement-contractors-ahead-of-isg-collapse","status":"publish","type":"post","link":"https:\/\/www.constructionnews.co.uk\/civils\/government-sounded-out-replacement-contractors-ahead-of-isg-collapse-25-03-2025\/","title":{"rendered":"Government sounded out replacement contractors ahead of ISG collapse"},"content":{"rendered":"

Government departments were lining up contractors to replace ISG months before it collapsed last September, a report has revealed.<\/p>\n

The National Audit Office (NAO) said ministers learned from the collapse of Carillion in 2018, when public money had to be pumped into finishing hospital projects started by the failed giant.<\/p>\n

In a report published today (25 March), the spending watchdog said the government put in place measures in its Sourcing Playbook<\/a><\/em> that were implemented last year.<\/p>\n

The UK\u2019s sixth largest contractor by turnover at the time of its collapse, ISG held at least \u00a31.84bn in government contracts<\/a> when it entered administration.<\/p>\n

The NAO said today: \u201cThe government had been monitoring ISG for months as it developed a rescue package to recapitalise its business. In parallel, departments developed their contingency plans in preparedness for a failure to minimise the impact, and instigated engagement with potential replacement suppliers.\u201d<\/p>\n

Many clients were left scrambling to appoint new contractors<\/a> after ISG\u2019s UK subsidiaries filed for administration in September.<\/p>\n

A report in December estimated<\/a> that the contractor\u2019s demise would add up to 18 months to certain prison projects it was working on.<\/p>\n

The Sourcing Playbook<\/em>, published in 2023, said: \u201cThe Model Services Contract includes various protections against supply chain risk. These include step\u2011in rights, the approval of key subcontractors and assignment and novation provisions.\u201d<\/p>\n

It added: \u201cAs part of procurement planning, we should consider how best to protect ourselves against costs arising from supplier insolvency. In most cases the optimal approach will be through self\u2011insurance, although performance bonds are common in construction contracts and should be used where they provide value for money.\u201d<\/p>\n

The NAO report set out a dozen recommendations or \u201clessons\u201d for the government to ensure private finance delivers infrastructure with a consistent pipeline (see box, below<\/em>).<\/p>\n

One of these was that \u201ccontingency plans should include protections and alternative options when public services are at risk\u201d.<\/p>\n

Elsewhere, the spending watchdog said it had heard from stakeholders that the Infrastructure and Project Authority\u2019s (IPA\u2019s) National Infrastructure and Construction Pipeline would benefit from \u201cimprovements to the level of detail, reliability of information and standardisation of monitoring of projects\u201d.<\/p>\n

It added: \u201cStakeholders we spoke to queried the level of detail in the infrastructure pipeline, the reliability of information and the status of projects \u2013 noting that these shortcomings were impacting investor confidence, the ability of the private sector to plan for the future and to target and win sufficient deals.\u201d<\/p>\n

Ministers in January said<\/a> a 10-year strategy, to be published this summer alongside the latest infrastructure pipeline, would consider \u201cthe role of private investment\u201d in tackling barriers to meeting infrastructure needs.<\/p>\n

\n

The 12 lessons<\/h3>\n
    \n
  • Public bodies responsible for mobilising private capital \u201cneed clear mandates and objectives\u201d.<\/li>\n
  • There is a need for a \u201ccredible and consistent\u201d infrastructure pipeline,<\/li>\n
  • Public bodies \u201cneed access to appropriate skills and resources to support investment\u201d.<\/li>\n
  • Ccontracting authorities \u201cshould apply robust and consistent criteria when assessing the business case for using private finance\u201d.<\/li>\n
  • Departments \u201cshould assess risks, determine who is best placed to absorb them and design agreements that clearly establish the corresponding risk allocation, funding flows and flexibility to address uncertainty\u201d.<\/li>\n
  • The government should balance \u201ca desire to minimise the cost of finance\u201d against \u201cproviding an attractive investment opportunity for investors\u201d.<\/li>\n
  • Project approval and financing decisions should be based on commercial and operational objectives, \u201cnot to meet accounting classifications\u201d.<\/li>\n
  • The government should undertake comparable evaluations of publicly and privately financed infrastructure assets.<\/li>\n
  • Contracting bodies \u201cshould adopt an efficient procurement process that is competitive and avoids undue delay\u201d.<\/li>\n
  • The public sector should actively monitor and review performance \u201ceven when projects are privately financed and run\u201d.<\/li>\n
  • Contingency plans should include protections and alternative options
    \nwhen public services are at risk.<\/span><\/li>\n
  • Public bodies should manage contracts across their whole lifecycle, \u201cincluding planning for the decommissioning of assets, extension of contracts, re\u2010procurement or taking over the operation of the asset\u201d.<\/li>\n<\/ul>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

    Government departments were lining up contractors to replace ISG months before it collapsed last September, a report has revealed. The National Audit Office (NAO) said ministers learned from the collapse of Carillion in 2018, when public money had to be pumped into finishing hospital projects started by the failed giant. In a report published today …<\/p>\n","protected":false},"author":87938,"featured_media":489305,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"ep_exclude_from_search":false},"categories":[549,565],"tags":[],"yoast_head":"\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\n\t\n\t\n\t\n