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More ‘reward’ for outsource giants in wake of Carillion demise

Posted by Lynne on May 7th 2018
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The bosses of Mitie and Serco will appear in front of Parliament’s Public Administration and Constitutional Affairs Committee this week as the Government gathers evidence in an attempt to avoid another high profile collapse of a business providing core services to institutions such as schools and hospitals.

Rupert Soames, the chief executive of Serco and Phil Bentley, the chief executive of Mitie, are expected to speak about how companies tender for work from the public sector, addressing concerns that profit margins have been pushed dangerously low by increasingly competitive pricing of contracts.  Mr Soames said there is “an urgent need to re-think the relationship between the UK Government and its suppliers”.  He said that a fundamental tenet of commercial life is that “risk must be balanced by reward” but that this was not always in proper balance in Government procurement. This had produced an “increasingly enfeebled supply base”.  He continued ” the provision of sensitive public services should not be completely exposed to the harhest rough-and-tumble, boom and bust cycle, of a totally free market where the relative power of either a buyer or a seller may become disproportionate”.

Carillion had been found to be bidding at low rates to secure more work.   A separate committee has been holding an inquiry into the company’s collapse, the findings of which are expected to be published in the forth coming weeks.

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