State bonanza continues for the crisis-hit outsourcers

The Government has continued to hand the UK’s troubled outsourcing giants contracts worth billions of pounds despite fears over their financial health and ability to deliver services. Mitie, Interserve, Carillion and Capita have been awarded more than ?2bn worth of public sector work since last summer, despite a string of profit warnings and crashing share prices.
In total, the four firms were awarded 450 different public contracts in the year to the end of July, the most recent month for which contract information is available. Over the last four years, the four companies have been awarded ?16.3bn worth of contracts in total, the research found. The study was compiled exclusively for The Sunday Telegraph by data specialists Tussell.
The Government’s continued reliance on outsourcers will raise concern over public service delivery. Industry observers are openly raising the possibility of one or more major providers facing a disruptive financial crisis. 
Public bodies including the Metropolitan Police, Highways England and numerous local authorities heavily rely on the big four outsourcers. Interserve, which suffered a 30pc share price collapse on Thursday after issuing a giant profit warning, won the highest value of the contracts at ?1.3bn.
State bonanza continues for the crisis-hit outsourcers

Government ministers were criticised when it emerged that Carillion was part of a group of contractors hired to work on HS2
The figure was more than twice as much as that won in the previous year. The company’s problems have been brewing for the last 18 months, after warning that an incinerator contract was likely to be hit by a ?70m impairment charge. The bill has since risen to ?195m.
The Government defended its decision to continue handing public funds to a company in financial difficulty.
A Cabinet Office spokesperson said: "The Government conducts a number of checks on our suppliers including financial strength as part of our rigorous procurement process."
The Cabinet Office, which deals with public sector procurement issues, added: ­“Interserve is an important supplier to the Government with a number of long-term contracts. We remain supportive of their ongoing discussions with their stakeholders.” 
Ministers were criticised after it emerged that a Carillion joint venture had been awarded a ?1.4bn contract for work on the new High Speed Two rail line, just days after the group’s share price crashed 70pc on the back of a profit warning. Figures from the Tussell research show that the company won ?161m of other contracts in the period, but since then it has also bagged a ?158m deal with the Ministry of Defence to manage part of its estate.
During the 12-month period, Mitie issued three profit warnings and lost its chief executive, but it still managed to win ?212m of contracts with public sector bodies including the Scottish emergency services. Capita, meanwhile, which was forced to make ?50m of writedowns in February, won ?321m of contracts. However, the previous year it won ?3.4bn of contracts, many of which span a number of years.
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