The relationship between the Government and private sector companies which supply services needs to be urgently reviewed in the wake of Carillion’s collapse, some of the company’s rivals will tell MPs this week.

The bosses of Mitie and Serco will appear in front of Parliament’s Public Administration and Constitutional Affairs committee today as the Government gathers evidence in an attempt to avoid another high profile collapse of a business providing core services to ­institutions such as schools and hospitals.

Rupert Soames, the chief executive of Serco, said in his submission to the committee ahead of the session that there is “an urgent need to re-think the relationship between the UK Government... </s> Carillion faces a direct probe into whether fatcat bosses caused the firm's spectacular collapse.

The Tory government has asked independent authorities to "fast-track and expand" their investigation into the construction and public services giant.

The firm plunged into liquidation yesterday, threatening 20,000 jobs and leaving the taxpayer on the hook for a reputed hundreds of millions of pounds.

Carillion faces questions over why its chief executive Richard Howson was being paid £660,000 for a year after he quit - and why Tory ministers granted it more than £1billion in new contracts even after a profit warning last year.

The Institute of Directors has also accused Carillion of "highly inappropriate" behaviour in making it harder to claw back executive bonuses.

Today Business Secretary Greg Clark wrote to the Official Receiver requesting that its probe considers "any individuals who were previously directors".

He added it should consider "whether their actions may have caused detriment to its creditors - including detriment to any employees who may be owed money.

"He [the Receiver] should also consider whether any action by directors has caused detriment to the pension schemes.

"I also ask that the Official Receiver expedites his investigation which will also specifically consider the extent to which the conduct of the directors of Carillion PLC led to its insolvency."

Any alleged misconduct by an individual director would be reported to the Secretary of State.

Mr Clark said: "Any evidence of misconduct will be taken very seriously."

Carillion runs massive railway building projects as well as being responsible for services at schools, prisons and NHS hospitals. It provides school dinners for more than 200 schools.

The firm has 450 government contracts that represent more than a third of its reported revenue in 2016.

The government will continue to provide funding for public services provided by Carillion.

But Downing Street gave no guarantees over Carillion's private sector work, aside from plugging the gap for 48 hours, and could not guarantee no workers will lose their jobs.

Shadow Chancellor John McDonnell today accused the government “drip-feeding more contracts to Carillion to buoy up an obviously failing company”.

He demanded "a full public inquiry immediately to find out exactly what’s happened."

He added: "The Carillion collapse has raised real suspicions that the government was too close to this company and too wedded to its privatisation role."

But Treasury minister Liz Truss said it would have been “completely wrong” for the company to be bailed out by the state.

January 15, 2018: Carillion collapsed after banks refused to provide any further financial support following fruitless rescue talks over the weekend. January 12, 2018: Carillion said it remained in "constructive discussions" with its creditors and that suggestions they had rejected its business plan were incorrect. Sky News reported that Carillion has put administrators on standby in case rescue talks fail. January 9, 2018: Carillion said it was not aware of any development to support a recent share price rise, a day after reports of a government bailout. January 6, 2018: Carillion said it would meet creditors on January 10 as it seeks a financial rescue plan. January 3, 2018: Britain's Financial Conduct Authority said it was investigating statements made by Carillion over seven months up to and including a profit warning last July. December 22, 2017: Carillion said it had received all necessary consents from lenders to defer two financial covenants to April 30 from the end of the year. December 20, 2017: Carillion moved the start date for new chief executive Andrew Davies forward to January 22 from April 2. December 13, 2017: Carillion said it had reached a deal to sell a large part of its UK healthcare facilities management business to outsourcing group Serco, helping it cut debt by £41.4 million. December 11, 2017: Scottish investment firm Kiltearn Partners, the largest shareholder in Carillion, halved its stake, a regulatory filing showed. November 17, 2017: Carillion's shares tumbled 34 per cent after it issued its third profit warning in five months and said it was heading towards a breach of debt covenants and would need fresh capital. November 6, 2017: Carillion won two contracts with state-owned Network Rail, which should generate revenue of almost £200 million for the company over the next three years. October 27, 2017: Carillion named Davies as its chief executive, bringing in a former executive of defence company BAE Systems to help turn around its business. October 24, 2017: Carillion agreed to new credit facilities and deferrals on some debt repayments, sending its shares up as much as 25 per cent. October 12, 2017: Carillion confirmed that it had received proposals from more than one counterparty for the possible acquisition of its UK healthcare business. September 29, 2017: Carillion had its second profit warning in 2017 and said it may need to sell shares to shore up its balance sheet. September 11, 2017: Carillion announced the departure of its finance chief along with a series of changes to its management. August 24, 2017: Carillion said it had been named as the main contractor on a £300 million Manchester property development. July 18, 2017: A Carillion joint venture won contracts worth £158 million to supply catering and other services for British military sites. July 17, 2017: A consortium that includes Carillion won a £1.4bn pound contract to help build Britain's High Speed 2 railway. July 14, 2017: Carillion added HSBC to its team of financial advisers, fuelling speculation that it was preparing a rights issue. July 11, 2017: Carillion shares fell 30 per cent as analysts doubted whether a string of measures to conserve cash would be enough to stave off a rights issue. July 10, 2017: The chief executive of Carillion quit as the group warned on full-year profit and said it was pulling out of three construction markets in the Middle East. The company also said payment problems on four construction contracts nearing or reaching completion had forced it take a provision of £845 million. </s> The boss of outsourcing giant Serco has accused the Government of “behaving badly” by passing off unreasonable contracts to suppliers, ignoring its own guidelines and shrouding its decisions in secrecy.

In a Commons hearing on lessons learned from the collapse of Carillion, chief executive Rupert Soames told MPs that a raft of “well run and well respected” outsourcers have lost vast amounts of money in recent years working on government contracts with “unmanageable amounts of risks”.

Mr Soames – a grandson of Sir Winston Churchill – claimed the Government has previously tried to pass off controversial and “unreasonable” contracts to outsourcing firms, while also routinely expecting suppliers to shoulder the risk of major law and policy changes.

He said: “It’s not unknown for Government to behave quite badly.

“It’s a monopoly buyer, it’s also the regulator, the referee and the giver out of business.”

He said the recent woes in the outsourcing sector, which led to the collapse of Carillion and forced a number of its rivals to raise emergency capital to bolster their finances, was “astonishing”.

“It’s been a massive, massive disruption in the supplier sector, the likes of which I’ve never seen – £8 billion written off of the supplier sector and billions of pounds being raised to recapitalise.”

He added: “A lot of this is management’s fault, but … the Government as a monopoly buyer cannot stand idly by and say ‘nothing to do with me, Gov’.”

“There’s a very good PIN (prior information notice) saying how departments should behave and what’s reasonable to ask firms to do and it is widely ignored among departments,” he said.

The Government process for deciding when to outsource and its decisions on contract bids are also “shrouded in opaqueness”, but should be transparent and audited by the National Audit Office, he added.

Mitie chief executive Phil Bentley, who was also giving evidence in the hearing, told MPs on the Public Administration and Constitutional Affairs Committee that he believed inaccurate data was also to blame for some failed outsourced contracts and called for greater data sharing and transparency.

He gave the example of the asylum seeker contract handled by Serco, which he said saw the numbers of asylum seekers “massively underestimated” and led to hefty losses on the work.

Both bosses also said the bidding process was also flawed, with the Government under pressure to choose the cheapest supplier, rather than focusing on quality and expertise.

Mr Soames added there are “no benefits for good behaviour, and no penalties for bad behaviour” in the process.

“In the commercial sector, you get a feeling people like their suppliers to behave well,” he said.

The company chiefs said the Government had tried to pass on the extra cost of the national living wage on some contracts, while also expecting suppliers to take the hit from any future policy changes from Brexit law changes.

Mr Soames has already publicly called for “living wills” and a new code of conduct as part of an overhaul of the public sector contracting market following Carillion’s collapse.

He has drawn-up a four-point plan where outsourcers handling sensitive government contracts should sign “living wills” setting out what will happen with projects in the event of the firm going bust, as well as suggesting greater transparency on project progress, with updates every six months to ensure they are held accountable.

He also believes contracts should have pre-agreed “break fees” for both suppliers and the Government to allow either to pull out if a project is not working.
The heads of Serco and Mitie are expected to appear before the UK's Public Administration and Constitutional Affairs Select Committee to testify over the collapse of Carillion.