Following the news of Carillion's liquidation this morning, public sector organisations whose projects involve Carillion as service provider will be keen to obtain comfort from their Project Co about service continuity and the related cost.

While there is an expectation that the public sector will continue to pay for services and staff, how will these services be delivered, in practice?  The majority of contracts, especially PFI will have "step-in" or "self-help" provisions which may need to be invoked.  If there is a non-Carillion owned Project Co, has or will it agree to meet the cost of any public sector step-in. 

We are already advising several NHS Trusts in ensuring that their arrangements on the ground are backed by contractual agreements from their private partners to meet costs and make alternative arrangements as soon as possible.

For those public organisations with outsourced contracts awarded directly to Carillion the contracts are likely to include termination grounds for insolvency but may be light on the practical and operational consequences and potential liabilities that may be incurred.  Consideration will need to be given to staff, pension issues including any deficits, assets, data, systems, subcontracts and many other issues. Whilst services will need to continue public bodies need to be conscious of possible liabilities that may be incurred and be ever mindful of their duties and procurement rules.

HM Government have offered this advice.

As one of the leading advisors to public sector organisations regarding the management of PFI contracts and suppliers, we can provide all the legal advice and reassurance you may need.   Contact our PFI team for more information.

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