Carillion cuts supply chain and squeezes subbies

Grant Prior 14 years ago
Share

Carillion is cutting its supply chain from 25,000 firms to just 5,000 in a bid to save £140m by 2013.

The plan, called Step Up, has already saved £42m and next month Carillion is moving to an electronic supplier invoicing system that will help it save a further £86m in 2011.

The Sunday Telegraph reported that Carillion, which spends £3.5bn with suppliers each year, is also using electronic auctions for some products and services to select which of its existing suppliers remain preferred suppliers.

It is initially ranking suppliers on the percentage discounts they offer on volume contracts.

One supplier said that to take part in the auctions, those in his service category were being asked about retrospective rebates on work already completed this year.

The rebates are understood to range from 3% to 8% depending on the type and volume of work.

Carillion, which employs 50,000 people around the world, is one of 34 “second tier” central government suppliers that have begun talks with the Cabinet Office about efficiency savings that could affect its profit margins this year.

Serco became the latest supplier on Friday to sign a deal with the Cabinet Office that will see it make savings.

However, Carillion, which maintains military bases, hospitals, schools and thousands of miles of roads in the UK, told investors last week that it expected its £5.4bn revenues to grow further in the UK next year despite the Government’s cut in capital expenditure as central and local government outsource more services.

The supplier to Carillion told The Sunday Telegraph: “The e-auction is all about the discount and not pricing. They just get the cheapest price.

“We had a meeting with them last week and they were really aggressive – either we offer a rebate and money retrospectively for this year or you get out.”

Carillion, which was de-merged from Tarmac in 1999 and acquired rivals Mowlem in 2006 and McAlpine in 2008, said it had no “general policy to seek retrospective rebates” but acknowledged that it did accept rebates when offered from suppliers.

A spokesman said: “In an increasingly competitive market, suppliers put forward proposals to customers aimed at improving performance, increasing efficiency and reducing costs, and in some instances this includes pricing in respect of both future and completed orders. This obviously affects the approach to pricing in the market in question and therefore other suppliers with whom they are competing.”

Carillion also said its supplier rationalisation programme would help it select the “best” suppliers to deliver “best in class services”. It said it used e-auctions because they were “transparent”.

Latest news

Taylor Wimpey chief honoured with CBE

Jennie Daly recognised in King's Birthday honours
17 hours ago

Geoffrey Osborne supply chain hit for £26m

More than 500 suppliers and subcontractors left holding unpaid bills
2 days ago

SME contractors agree 4% pay rise for site workers

Workers will also get an extra day of holiday
2 days ago

Labour to mothball £320m A27 job to fix potholes

Manifesto confirms Arundel Bypass canned as "poor value for money"
2 days ago

Lendlease’s £1.9bn Smithfield Birmingham scheme approved

Initial work to start later this year despite questions over Lendlease's degree of involvement
2 days ago

Crest Nicholson rejects £650m Bellway bid

Second Bellway approach rebuffed
2 days ago

Hill submits £800m East London estate rebuild plan

Over 1,900 homes to be built in five phase at Teviot Estate in Poplar
3 days ago

Plan approved for 8,500-seat Edinburgh indoor arena

Construction expected to start next year once a contractor is appointed
2 days ago

Statom starts on £25m Bristol Airport precast car park

Major work package on transport upgrade being overseen by Griffiths Farrans JV
3 days ago

Build problems plunge Crest Nicholson to a £31m loss

House builder unearths more defects on completed sites
3 days ago

Rebooted Amey lifts contract win rate to 1 in 3 bids

Amey chief says firm exceeded expectations in first year under new owners
3 days ago

BAM Nuttall fined £2.3m after worker drowned

Court hears how series of safety failures led to tragedy
3 days ago

OCU buys Scottish civils contractor RJ McLeod

Deal takes multi-utility infrastructure specialist revenue to over £800m
4 days ago

£220m plan to restore secret wartime tunnels approved

Tunnels under High Holborn to become cultural exhibition space
4 days ago

Galliford Try wins £69m Scottish school job

Deal sealed on Paisley Grammar School project in Renfrewshire
3 days ago

Balfour wins design for £690m Skye transmission job

Main work contract for 137km power line to be awarded later this year
4 days ago

Student and resi developer Fortis goes under

Cheshire based developer follows construction arm into liquidation
4 days ago

Construction output falls for third month running

Heavy rain and strong winds blamed for sharp fall in activity in April
4 days ago

Plan in for Leeds 27-storey block of flats

390 flats planned at former Morgan Sindall office site
4 days ago

Firms readied for £1.5bn Parliament estate upkeep deal

Invitation to tender due to go out next month
4 days ago

Amey switches kit supplier

Deal with HSS was worth £24.5m a year to rental specialist
4 days ago

Track workers scatter to avoid runaway rail trolley

Track trolley careers 1km towards work site
4 days ago

Direct delivery model pays off as Murphy profit soars to £67m

Group operating margin jumps from 3% to 5% in record year
5 days ago

Ex-Galliard boss to lead Battersea next building phase

Don O’Sullivan joins as plans advance to start phase 3C of power station redevelopment
5 days ago

£100m Digbeth 33-storey flats job out to bid

483 flats will be delivered for Clarion housing association
5 days ago

Van Elle fined £233,000 after piling rig kills driver

Court hears how tragedy was caused by poorly maintained plant
5 days ago

Renew buys utilities contractor Excalon

Infrastructure giant expand into electricity transmission market with £26m deal
5 days ago

Planning for new homes plunges to record low

Home builders call for urgent action from incoming government
5 days ago

JTRE starts £400m 21-floor London tower scheme

Office block and 64 affordable homes to be built at 220 Blackfriars Road site
6 days ago

R G Carter construction profits up despite 24% revenue fall

Selective client choice help profit jump to £6m from £1m previously
6 days ago

Contractor services