img(height="1" width="1" style="display:none" src="https://www.facebook.com/tr?id=2939831959404383&ev=PageView&noscript=1")

Q&A: Mark Farmer

Words:
Jan-Carlos Kucharek

Author of the government commissioned Farmer Review of the UK construction labour market, Mark Farmer offers his view on the Carillion crisis

Carillion’s downfall – did it come as a surprise?

What is perhaps most surprising about the events leading up to the collapse is the short time between the firm announcing a relatively healthy trading position and three consecutive profit warnings. For a business this big to go into this death spiral so quickly is unprecedented and although pension fund liabilities were extensive and there were problem contracts, it suggests the true extent of Carillion’s contract losses were initially understated.

What does it mean for construction?

It’s further evidence that the industry’s delivery model is broken and that ‘business as usual’ is no longer feasible. It’s a market of large scale fragmentation and sub-contracting, a turnover rather than margin culture, a growing skills and labour crisis, rising cost inflation and systemic issues of deteriorating predictability of cost, time and quality outcomes for end clients.

Will Carillion’s collapse have a wider ripple-effect on the sector?

Carillion’s exposure and breadth of operation mean its liquidation will ripple through the entire supply chain, potentially affecting thousands of jobs and a gigantic work portfolio. Its half-completed sites will face the daunting task of negotiating work with the supply chain to continue to deliver and finalise those projects. The impact on creditors could leave the wider industry exposed, creating a domino effect through every layer.

What lessons are to be learned?

The structural problem the industry must now reflect on is the delivery model. The crisis shows that divesting to sub-contractors has gone too far, where risk is disproportionally shared and accountability is non-existent. The myopic focus on turnover, rather than improving margins and removing waste in the supply chain through efficiency and innovation, has resulted in the immediate collapse of a giant. It should serve as a seminal moment and a catalyst for change.

Any silver linings?

Bizarrely, the procurement and delivery practices that Carillion’s clients and advisors will now be forced to adopt to get their projects completed are likely to be a lot closer to what the industry should be doing as standard. These will include direct procurement at Tier 2 specialist level (sub-contractor level), management and package procurement, incentivised delivery based on more integrated discussions and a better understanding of delivery risk.


Via construction intelligence website EGi

Latest

Rory Chisholm’s fascination with courtyards – like ‘a simple clearing in the woods’ – produced the pencil and ink drawing of Manchester that netted him 1st winner, practitioner

Practitioner, 1st winner: Rory Chisholm

Eye Line entrants bared heart and soul with impassioned, thoughtful images

Eye Line entrants bared heart and soul with impassioned, thoughtful images

Annabelle Tan is Eye Line's stand-out 1st winner, student, for her exquisite drawings, depth and rigour, and ‘clear sense of spatial narrative’ laying traditional forms of Asian representation on the Romantic English landscape

Student, 1st winner: Annabelle Tan

Greenest ever Olympics claim is just greenwash say critics. Meanwhile, Liverpool’s loss of world heritage status sounds alarm bells for other UK sites, and architects remain unmoved by Jenrick’s unexpected praise

Critics reject Japan's sustainability claim and Unesco's heritage axe threatens more UK sites

Pu Zhang receives 2nd Winner, student, with charming compositions that ‘seem to lead you into the images’ using colour, light, tone and texture to evoke memories

Student, 2nd Winner: Pu Zhang