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Serco and Mitie bosses to face MPs over Carillion collapse

The relationship between the Government and private sector companies which supply services needs to be urgently reviewed in the wake of Carillion’s collapse, some of the company’s rivals will tell MPs this week.
The bosses of Mitie and Serco will appear in front of Parliament’s Public Administration and Constitutional Affairs committee today 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, said in his submission to the committee ahead of the session that 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 said.
Serco and Mitie bosses to face MPs over Carillion collapse

Serco Group boss Rupert Soames

Credit:
 Luke MacGregor/Bloomberg
Mr Soames, alongside Phil Bentley, the chief executive of Mitie, is expected to speak about how companies go about bidding for work from the public sector, addressing concerns that profit margins have been pushed dangerously low by ­increasingly competitive pricing of contracts. Carillion had been found to be bidding at low rates in order to win more work.
Mr Soames said: “The provision of sensitive public services should not be completely exposed to the harshest 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.” The committee has been gathering evidence about the wider process of procuring public services in the wake of Carillion’s insolvency in January, amid concerns that another major failure could put public services at risk.
The Government claims that its contingency plans meant that jobs previously done by Carillion, such as providing cleaning and school dinners, continued despite the disruption.
However, construction projects which the group had been working on, including a major hospital in the Midlands, have been badly delayed.
A separate committee has been holding an inquiry into the company’s collapse, the findings of which are expected to be published in the coming weeks.
Also appearing before the committee are Karl Wilding from the National Council For Voluntary Organisations; David Walker, the former director of public reporting at the Audit Commission who now writes for The Guardian; and Matt Dykes from the TUC.
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