Industry bodies have called for “urgent” changes to public sector procurement policies after M&E firm Vaughan Engineering, owed £300,000 by collapsed contractor Carillion for a school job in Runcorn, signalled its intention to appoint administrators.
Vaughan Engineering, which has an office in Warrington, worked on Carillion’s Heath School in Runcorn through the Education & Skills Funding Agency, but was still owed £300,000 on the project when Carillion was liquidated on 15 January this year.
The company had called on the ESFA to help retrieve the payment, but said “no assistance has been forthcoming”, and combined with losses on another Carillion job in the North East, this has forced the group to call in administrators with around 160 jobs under threat.
The group reported a revenue of £38m and an operating loss of £2.6m in its most recent accounts, covering the year to 31 March 2017, and the firm chalked up the losses to bad debts and writedowns on work in progress.
Other projects the firm had worked on across the North West included a £1.6m M&E package on Stockport Homes Headquarters for main contractor Eric Wright. It had also worked on Chetham’s School of Music in Manchester with Sir Robert McAlpine; Easyhotels in Manchester and Liverpool with Styles & Wood; and One New Bailey with Bowmer & Kirkland.
David Frise, chief executive of the Building Engineering Services Association, said Vaughan was owed more than £600,000 for completed projects by Carillion, and was contracted to carry out a further £1.1m of work with the contractor in the first three months of 2018.
He called for the Government to speed up changes to its public procurement policies, including “urgent and tough action” on retentions, to protect SMEs in the sector.
“[Vaughan] paid more than £6m annually in salaries and maintained a skilled workforce contributing to vital public sector projects,” said Frise.
“On top of this, it was paying substantial amounts to its own supply chain and contributing to the wider economy through tax. All of this will be lost through no fault of its own.
“[Carillion’s liquidators] PwC blithely informed the industry that none of the payments outstanding on 15 January would be paid, but are, no doubt, receiving their own multi-million pound fees without delay while thousands of SMEs face ruin.
“We have had multiple voluntary late payment initiatives over the last two decades – none of which proved of to be of any use whatsoever in the face of notorious late payers like Carillion.”
BESA added it was continuing to assist a number of other firms who have been affected by Carillion’s collapse.