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Why did Carillion fail?

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DATE: Wed 24 Jan 2018

Why did Carillion fail?

There has been a lot of talk over the past week or so about why Carillion failed, but the answer may have been there all along. A quick look at Carillion’s 2016 annual report may provide the answer. In their risk analysis, the top two risks Carillion identified for itself were

  1. Failure to win and retain contracts on satisfactory terms and conditions..... ;
  2. Ineffective operational commercial and financial management of contracts.

This leads us to two questions:

  1. Were Carillion only winning so many contracts because they had priced them too cheaply?
  2. Were they guilty of ineffective operational commercial and financial management?

There may be myriad other reasons outside of the pricing and management of projects which could cause problems, but it is undeniable that these are core skills that a company like Carillion must get right. Two possible causes of loss making projects, are pricing too low or not delivering according to your plan.

Pricing even a simple contract will often involve some sort of bid model. When you are bidding for multimillion pound contracts, the model becomes a business critical tool.
Here at Numeritas we know a thing or two about bid models and we've distilled our experience to identify 7 key success factors.

Download our guide “Seven success factors for bid-pricing models” to get the benefit of some of our experience.

Watch a video about best practice modelling

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