NTMA considers public contractors risk list after Carillion collapse

‘Too much emphasis placed on price when public contracts are being awarded’

Speaking at an Oireachtas Public Accounts Committee (PAC) hearing on Thursday, NTMA chief executive Conor O’Kelly said a list would allow procurement officials in departments and Government agencies to assess if Irish taxpayers had too much exposure to certain ‘counterparties’.

Speaking at an Oireachtas Public Accounts Committee (PAC) hearing on Thursday, NTMA chief executive Conor O’Kelly said a list would allow procurement officials in departments and Government agencies to assess if Irish taxpayers had too much exposure to certain ‘counterparties’.

 

The National Treasury Management Agency (NTMA) has been prompted by the collapse of the UK outsourcer Carillion to look at setting up a list of public-sector service suppliers, to help avoid the State becoming too exposed to individual firms.

Speaking at a Oireachtas Public Accounts Committee (PAC) hearing on Thursday, NTMA chief executive Conor O’Kelly said that such a list would allow procurement officials in departments and Government agencies to assess if Irish taxpayers had too much exposure to certain “counterparties”.

“I think that’s something we might take a look at and take forward proactively,” Mr O’Kelly said.

While the UK operates a system where suppliers with contracts across departments generating more than £100 million (€113.3 million) a year are assessed according to a “traffic light” rating system, it emerged in the fallout from Carillion’s implosion in January that officials in London ignored advice last year to assign the highest risk rating to the company.

A report by the UK parliament’s public accounts committee in May said that the cabinet office did not act on an official recommendation in November that Carillion be given a black “high risk” rating. Carillion also won two big UK government contracts last July after the company issued a profit warning and its rating was downgraded to “red” from “amber”.

School and college projects

Work on six school and college projects in Ireland ground to a halt earlier this year as Carillion’s bankruptcy led to the liquidation of Co Kildare-based Sammon Contracting, which had been hired by a Carillion subsidiary to construct the buildings. Work has since resumed on the developments, as Co Tyrone-based Woodvale Construction was awarded the contract last month.

Mr O’Kelly told reporters on Monday at the launch of the NTMA’s latest annual report that too much emphasis had been placed up until now on price when public contracts were being awarded.

“It seems clear that Carillion won a lot of contracts [internationally] on price – and price has a very high weighting in nearly all public procurement contracts,” Mr O’Kelly said.

In future, however, officials seeking tenders for public-private partnership contracts will have to place more emphasis on the balance-sheet strength of companies on the other side of the deal, according to Mr O’Kelly.

Mr O’Kelly added on Thursday that price usually accounted for 40 per cent of the scoring when tenders for public contracts were being assessed.

Meanwhile, NTMA executives were questioned by PAC members about how the agency had to write off €853,000 of costs incurred in the past two years for a planned new treasury management system, which it had hired US firm Openlink to build but has since abandoned.

NTMA chief financial and chief operating officer Ian Black said the agency terminated the deal when it lost confidence in the supplier’s ability to deliver. He said “discussions are ongoing” between both sides.