Question to the Cabinet Office:

To ask the Minister for the Cabinet Office, what the Government's policy is on awarding contracts to companies which have issued profit warnings.

The Government’s priority is to ensure the continued delivery of public services, and we have contingency plans in place to ensure this happens. We routinely stress-test contracts to ensure that if one party within a contract fails to deliver, the other parties involved will step in to complete the work.

The majority of public procurement is governed by Public Contracts Regulations. These stipulate that public procurers have to award contracts through fair and open competition, in line with principles of equal treatment, transparency and non-discrimination. Suppliers have to meet certain criteria to be able to bid for public contracts, including a minimum level of financial and economic standing proven through turnover, audited accounts or other financial measures.

Given that a large number of companies issue profit warnings from time to time, it is unrealistic to terminate all business with such a company as this would further undermine chances of company recovery

Once Carillion had made the profit warnings, we took steps to ensure that greater degrees of protection were built into the small number of specific contracts that were awarded after July last year.