There has been a lot in the news about the appointment of a liquidator for Carillion and what this could mean for existing contracts with schools.

There are generally two types of Carillion contracts that schools are involved with:

  • Contracts to build or maintain new schools or buildings; and
  • Contracts for school services, such as cleaning or catering.

These contracts are sometimes a result of a PFI scheme, but that is not always the case.

At the moment, the government's advice is "business as usual" although it does accept that at least some building contracts may need to be re-procured due to Carillion's difficulties. If schools with Carillion contracts are concerned about timescales slipping or build programs simply stopping, they should be looking at the detail in the contract to see what it says about insolvency. Often, the contract can be terminated due to a party's insolvency and this may be something that schools want to consider doing although they should talk to other parties involved with the contract – often this would be the local authority.

If schools have service contracts with Carillion, then there is a pressing need to talk to the Carillion staff who work at the school to get a feel for their concerns and plans. At the moment, Carillion staff are being reassured that they will be paid but, if that promise proves hollow, or if their staff take matters into their own hands and change job, schools could find themselves without their regular service staff. Schools should make emergency plans for such a situation.

One rather drastic option would be for schools to terminate their contracts with Carillion if the contractual insolvency provisions allow for that. They would then be free to use another contractor or even employ the existing Carillion staff direct. Before terminating any Carillion contracts, schools should review the terms carefully to see what rights they have to terminate and consider whether any termination might trigger a penalty. We can help with this review if required.