The managing director of construction consultancy at MPG, Michael Gallucci, offers his advice on how firms affected by the collapse of Carillion should respond.
Around 30,000 businesses are owed collectively £1 billion following the catastrophe, with chains of first tier suppliers and subcontractors left in a state of uncertainty. The questions is now what should these businesses do about the money they are owed for the work they had completed?
Michael says that the first step is recognising how exposed your company is. If your business’ survival depends on this payment then it should become your number one priority. However, if your situation is not that critical, you are better off focusing on other customers and opportunities than wasting time on this issue.
Banks have created a new fund to help those affected by the collapse and the government has a task force that will address this issue. This is worth looking into, but it is not a certainty and there are other things you can do to protect your business.
After you understand your situation, look at where you have outstanding contracts and see if these are affected directly or indirectly with Carillion. Check them and make sure you are entitled to suspend or terminate the contract with the customer and then look at the options you have with the subcontractors.
The contract may or may not tell you specifically what should happen if one of the parties in the supply chain becomes insolvent. If it does, make sure you keep track of the progress, if it doesn’t then you should start retrieving the owed money through legal means or by withholding future work on the project until you get paid.
“I am a strong advocate of effective programmes and record keeping to protect yourself in the event of disputes or situations that lead to potential non-payment such as your customer going into liquidation. If you don’t already have full written records of the work you have carried out on any projects affected by the liquidation of Carillion, prepare them now,” advises Michael.