Carillion cuts supply chain and squeezes subbies

Grant Prior 12 years ago

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

Green light for £135m Leeds twin tower resi scheme

Construction to start in New Year on 500 build-to-rent apartments
22 mins ago

Plans in for £40m surf park at former Kent colliery

Seahive surf lagoon and health resort will be built near Deal
8 hours ago

Crushed demolition worker vows to return to industry

Shannon Brasier hoping to return to construction following horror accident
8 hours ago

Mount Anvil to start 900-home North London estate rebuild

Planning approval paves way for Barnsbury Estate rebuild in Islington
8 hours ago

Green light for major laboratory campus in Cambridge

Developer BioMed to tender first building on 600,000 sq ft lab complex in the New Year
9 hours ago

Belfast firm signs the biggest work deal yet under Project Gigabit

Fibrus to hook-up rural Cumbria to lightning-fast broadband under £108m deal
8 hours ago

McLaren wins Leeds logistics park contract

Work to start imminently on warehouse complex for Firethorn Trust
1 day ago

Work restarts on £683m waste power plant after site death

Construction suspended for a week of investigations following fatality
1 day ago

Demolition starts on £135m Wigan Galleries scheme

Contractor BCEGI starts work on project to redevelop Wigan town centre
1 day ago

Amey CEO to step down following private equity buyout

Amanda Fisher to leave once business is transferred to new owners
1 day ago

New body set up to vet plant operator card schemes

Contractor trades bodies unite to tackle competency concerns over plant operator skills cards
1 day ago

Kier leads switch to hybrid battery generators

Battery units work alongside smaller generators cutting run times by nearly 60%
1 day ago

Plans in for first Leeds co-living scheme

Watkin Jones submits plan to convert old Direct Line HQ into 230 studio flats
1 day ago

Demolition worker crushed by excavator

Court hears 20-year-old woman was left with "life changing injuries"
2 days ago

Government pays £700m for 50% stake in Sizewell C

New body, Great British Nuclear, will be set up to develop pipeline of nuclear projects
2 days ago

Costain wins Heathrow Airport asset renewal deal

Firm takes early contractor involvement role in Terminal 2 baggage handling upgrade
2 days ago

Worker killed on £683m waste power plant site

Fatal collision involving heavy goods vehicle on giant north London site
3 days ago

HS2 JV shifts four Wembley Stadiums of earth in record time

EKFB team digs and hauls 15 million cu m of muck in 20 months
2 days ago

Milestone wins £300m Wiltshire highways upkeep

Ringway will hand over to Milestone in March next year
2 days ago

Low-risk business model helps Renew post record results

Renew reveals latest acquisition with £15.6m purchase of water specialist Enisca
2 days ago

London Albert Embankment hotel towers approved

Two separate hotels rising to 26 and 29 storeys approved
2 days ago

Keltbray names new director of strategic engineering

Tim Lohmann takes up newly-formed role to drive innovative engineering solutions
2 days ago

Go-ahead for £200m lithium refinery on Teesside

Work to start next year on Europe's first lithium hydroxide processing plant
3 days ago

HS2 agency workers paid the wrong wages

Payroll software problems leave workers out of pocket
3 days ago

Electric car whizz joins O’Rourke

Contractor looking to learn tech lessons from other sectors
3 days ago

Electrical contractors still confident despite staff shortages

Order books healthy but worries grow over margins
3 days ago

BAM to deliver £44m Yeovil College campus build

BAM will submit a planning application next month to start work later next year
3 days ago

Bouygues starts London 700-home council estate rebuild

Developer Linkcity seals financial close on Old Kent Road Tustin Estate job
3 days ago

Construction’s “Leading Lights” recognised

Full details of latest winners of Considerate Constructor Scheme's latest awards
3 days ago

ISG wins £600m Hertfordshire Hollywood film studio job

Holywood studio Sunset awards pre-construction contract for 90-acre studio complex in Broxbourne
6 days ago

Contractor services