Carillion defends payment terms

Rudi Klein, legal expert and chief executive of the Specialist Engineering Contractors’ Group, describes Carillion’s policies as “an outrageous ultimatum”. He told CM: “With their overlong payment period Carillion is effectively using its supply chain to fund its projects. Subcontractors will have to pay for the pleasure of working for Carillion.”

He added: “How can this help with team working? It undermines relationships within the industry and undoes all the hard work done to encourage partnering. Basically, it’s being implemented to pay for the acquisition of Mowlem.”

Paula Manning, Carillion’s communications director, defended the firm’s policy: “It’s not an ultimatum. It’s been done through negotiation.” She said it was standard practice for Carillion and the vast majority of subcontractors had agreed to the terms.

Manning dismissed Klein’s interpretation of why Carillion had asked contractors to comply with its terms. “We consider our supply chain to be critical,” she said. “We’ve not been heavy-handed at all. In fact the first thing we did was ensure outstanding payments were made. This is absolutely not about funding our recent acquisition.”

Klein says subcontractors have little choice but to sign up. But as government procurement practice for public projects suggests a 30-day payment period, he believes Carillion should be excluded from Olympic contracts, which honour the government guidelines with built-in “construction commitments”.

“We’ll be asking all public sector clients – not just those involved in the 2012 Olympics – to think twice about selecting Carillion for works. We’ll be watching closely.”

Asked if Carillion was ruling itself out of the Olympics, given the shorter payment period in place, Manning said: “We’re interested in infrastructure contracts rather than stadia builds anyway and the terms and conditions for those contracts are not yet finalised.”