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Oxford Council could set the scene for more public sector FM contract reviews

21 July 2017

An Oxfordshire County Council member has warned that more public sector organisations may be looking to renegotiate their FM contracts, following news of its dealings with Carillion.

Having announced previously that it was terminating a large proportion of a 10-year £500m construction contract with the company, it is now considering the future of its FM deal with the business.

According to Reuters, the council's director of property, assets and investment Alexandra Bailey said the FM contract is currently under review.

The long-term contract is estimated to be worth between £50m and £60m per annum and up to £300m in total.

Although Carillion has announced the winning of three government contracts recently, including two for the HS2 rail project, it has previously issued a profit warning and written off £845m earlier this month.

Its shares have lost two-thirds of their value in less than two weeks, said Reuters, which compares Carillion's example with other large FM providers, including NG Bailey, that have also missed financial targets.

Although it was reported that a contract review after four or five years on long-term deals was common, an Oxfordshire County Council said this was likely to become more common within the public sector.

Councillor Lorraine Lindsay-Gale was quoted by Reuters as saying the council's dealings with Carillion had been "tactical" and would allow it maintain in-house control of essential services, while providing more freedom to choose which to outsource.

"I suspect what you will see throughout the public sector is more and more people moving into positions like ours as they watch their policies in some of their markets," said Councillor Lindsay-Gale.

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