Carillion collapse: MoJ perm sec Richard Heaton reveals department’s contingency planning

MPs get update on outsourced prisons contract as Cabinet Office reports public services are being maintained

MoJ perm sec Richard Heaton Credit: Parliament TV/CSW

By Jim.Dunton

18 Jan 2018

Ministry of Justice permanent secretary Richard Heaton has told MPs that officials were battling with performance issues in a prisons contract outsourced to Carillion at the same time as preparing contingency plans for the firm’s collapse.

Heaton was quizzed over his department’s response to Carillion’s plunge into insolvency by members of spending watchdog the Public Accounts Committee ahead of a previously-scheduled hearing on changes to Community Rehabilitation Contracts yesterday.

The firm was awarded a £200m five-year facilities management contract covering more than 50 prisons in the Midlands and Southern England in 2015. Since Monday, staff – many of them former civil servants TUPEd over to Carillion – have continued working on the contract under the direction of the official receiver.


Heaton said the prisons contract was his department’s “major exposure” to the fallout from Carillion’s demise, and that conversations were ongoing with the official receiver over the PFI contract’s medium-term future. 

“We’ve been working, as you would expect, on various contingencies for precisely this scenario, and we’re in near-final discussions with the official receiver on precisely what shape of service delivery that contract should take at present,” he said.

Heaton suggested that the MoJ had a preferred outcome for the situation, but declined to outline it to members of the committee. 

“I’m a tiny bit reluctant to speculate on the scenario which is likely to emerge, simply because we haven’t had consultations with our trade unions, which we would certainly need to have, and the official receiver is the person who would sign off on what would be delivered,” he said.

“It may not be the one the official receiver blesses, but we have a fairly clear solution in mind.”

Heaton said the likely cost to the MoJ of the Carillion debacle was “unknown at this stage” but he accepted that there “may be some additional costs – dislocation costs of stabilising the service” that he could not put a figure on.

“We’ve been working hard to make sure that the invoices we’ve been getting from Carillion and the official receiver were correct and accurate,” he said. 

“We’ve been working on the supply chain, and we’ve been working closely with the Treasury to make sure that any economies of scale can be derived through the overall solution.”

Heaton said that in addition to undertaking contingency planning for the possibility of Carillion’s collapse following the profit warnings it began issuing last year, officials had also been working to improve service delivery issues on the prisons contract.

HM Prison and Probation Service chief executive Michael Spurr said increasing levels of violence and vandalism in UK prisons had put additional pressure on outsourced maintenance contracts, and confirmed the issue had been among Carillion’s problems – but not uniquely so. 

“The contract was focused on maintenance and preventative maintenance and we’ve had to significantly increase the amount of hours spent on reactive maintenance to deal with vandalism, etc...” he said.

“That was one of the issues related to the contract. We hadn’t made enough allowance for reactive maintenance rather than preventative maintenance.”
Both Heaton and Spurr said they had no knowledge of one contractor reportedly downing tools on prison cleaning work in the wake of Carillion’s insolvency. Spurr said he expected it was a subcontractor issue.

In addition to the prisons contract, Heaton also told MPs that Carillion was a member of a PFI joint venture that provided facilities management services to “a very small number” of courts, and was “a very small bit player” in signposting enquiries to the Legal Aid Agency’s Legal Aid Helpline.

The Cabinet Office yesterday issued an update on Whitehall’s oversight of Carillion’s demise, which focused in part on the 400-plus government contracts it is understood to be involved with. 

“Our primary responsibility has always been keep our essential public services running safely,” it said.

“Government is providing the necessary funding required by the official receiver to maintain public services. Staff that are engaged on public sector contracts continue to come to work and will continue to be paid.”

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