UNISONActive is an unofficial blog produced by UNISON activists for UNISON activists. Bringing news, briefings and events from a progressive left perspective.

Thursday, 9 September 2010

Connaught the contractor run like Enron?‏

The administrator now running Connaught, the failed housing and ground maintenance contractor, has admitted there were accountancy problems in the company. These look somewhat familiar to anyone who remembers the Enron scandal.

The administrator remarked to the Guardian: "They were taking contract accounting far too far when …all they were doing was repairing windows and kitchens." It seems a classic case of loss leader bidding which in the end always ends up increasing costs for public authorities when the contractors fail. The administrator went on "what I mean by that is a lot of costs ended up on the balance sheet as 'assets' rather than in the profit and loss [account] as 'costs'.

"So you could argue that profits were being increasingly overstated. They were being not as prudent as they should be with certain costs, they were capitalising them, hoping to recover them over the life of contracts – training, costs of setting up contracts, IT costs etc. Of course, they didn't.”

Now the administrator wants jobs to be rescued by local authorities taking the contracts back in house which will mean they will have to take the workers back under TUPE and start to refinance the building programmes with money they would have not anticipated spending.

Once again the market and privatisation fails public services, workers and their families.