Forbes Burton Calls on Contractors to Protect Themselves

“It’s time for the far-reaching mismanagement of Carillion to be recognised.”

That’s the message from Grimsby-based company rescue and recovery specialists Forbes Burton.

Following last week’s dramatic collapse of the construction giant Carillion, Forbes Burton Director Rick Smith has said that as well as the negative repercussions yet to be revealed from the events of this week, the culture of complex contractual obligations and unfair practice needs to be addressed by those seeking contracts from similarly large concerns.

Rick said: “It’s been disheartening to see the effects that the liquidation served on Carillion this week is going to have on a lot of private sector workers and public projects. Many will now no doubt be stalled, but the culture of Government contracts has already had far-reaching negative implications for companies further down the supply chain.

“Frankly, the trail of devastation left by the likes of Carillion does not start with this week’s events, rather it has been taking place for years.”

Forbes Burton has worked with several companies recently who have never had their debts from the company repaid and has seen many having to dissolve their companies through a lack of cash flow and timely payments.

“This kind of contractual mismanagement is sadly now part of the industry,” says Rick, “Sub-contractors will always have to suffer the indignity of complicated contract arrangements. Add to this the practice of retentions, where larger concerns reserve the right to withhold a certain amount of payment for projects. Those who do not factor in this frequently unpaid amount to their budgets are often left out of pocket.

“For example, a company could take on a £100,000 contract, only to end up being paid around 80% of that due to a retention not being agreed further down the line. Those who don’t add in or factor for these events can end up in ruins.”

Despite this revelation, Rick states there are positive ways in which companies can protect themselves when considering these kinds of contracts.

“Know the risks when you sign on the dotted line and make sure you diversify. Too often we see companies approaching us who have placed all their eggs in one basket. If the foundation of your business is built on one, high-risk partner, you have little scope for survival if things turn south or you are beset with problems. Knowing what you can lose is also important, so have enough reserves to ensure your survival.

“Sadly, the repercussions can be dire – not being able to afford equipment or pay staff often results in negative press and debt – so make sure your cashflow is set to protect you. In a world where contracts are hard-won and payment terms are often on 30, 60 or even 90-day schedules, it pays to be cautious.”