LONDON: Qatar鈥檚 refusal to settle a 拢200 million bill is said to have been one of the final nails in the coffin for UK construction giant Carillion, which went into liquidation on Monday.
Carillion claims payment is outstanding for work on a 拢500 million ($692 million) development deal related to the 2022 World Cup.
Rudi Klein, chief executive of the Specialist Engineering Contractors鈥� (SEC) Group, said the Qatar contract was among a small number of 鈥渂ig infrastructure projects that meant the end was nigh for Carillion.鈥�
鈥淭he Qatari government will be now looking very urgently for alternative contractors to do this work and they may have to pay rather a lot more to do that,鈥� Klein told Arab News.
The unsettled debt is the latest shadow to engulf preparations for the World Cup in 2022.
Controversy was initially cast over Qatar鈥檚 2022 World Cup bid when allegations of corruption emerged followed by reports of exploitation from the construction sites, where workers complained of inhumane conditions and unpaid wages.
Contractors then warned of delays to World Cup projects in June 2017 when Gulf countries began the ongoing boycott of Qatar.
The Qatari government now faces further complications with the collapse of Carillon, which was involved in the $5.5 billion Msheireb redevelopment of Doha鈥檚 Downtown ahead of the World Cup.
In October 2017, City A.M. reported that top Carillion executives were making monthly trips to Doha to persuade Msheireb, backed by the Qatar Foundation, to settle the outstanding bill.
Msheireb, however, says it is owed a significant sum for contractural obligations it claims Carillon has failed to fulfil.
Carillion is one of the largest contractors operating in the Middle East, with projects including the Dubai Canal and the Royal Opera House in Oman, mostly through joint ventures.
The fall in oil prices contributed to a slow down in construction spending across the region, prompting Carillion to start pulling out of Middle East markets.
Commentators criticizing Carillion鈥檚 construction delivery model in the wake of its downfall emphasized the danger inherent in its practice of outsourcing on a large scale, particularly when operating in overseas markets.
鈥淚n the Middle East, where construction works are delivered very site-labor intensively and with high proportions of unskilled transient migrant labor, the delivery failure risks in terms of cost overruns, delays and quality problems can be magnified,鈥� said Mark Farmer, CEO of Cast, a real estate and construction consultancy.
鈥淭his undoubtedly creates heightened risk for those contractors that are not able to adequately supervise or control and manage the construction process.鈥�
Klein said Carillion鈥檚 role as a 鈥渕iddleman鈥� left the company ill-equipped to supervise projects, which could be more efficiently managed by smaller, regional contractors. Klein added, 鈥�95 percent of what Carillion did was outsourced; they never did a thing.
鈥淣ow is time to get rid of the middleman and to look at how we engage directly with the people actually doing the work.鈥�
The collapse of Carillion was a dramatic unraveling of the UK鈥檚 second-largest construction firm, which employs 43,000 people worldwide, including 19,000 workers in the Gulf.
British Prime Minister Theresa May on Wednesday defended the government鈥檚 decision to sign major deals with the company after it issued its first profit warning in July. Carillion has public sector and private partnership contracts worth 拢1.7 billion in the UK, including for services in the NHS and Ministry of Defense.
鈥淲e鈥檙e making sure in this case that public services continue to be provided, that workers in those public services are supported and taxpayers are protected,鈥� May told MPs.
Labour leader Jeremy Corbyn accused the British government of 鈥渘egligence鈥� over Carillon and called on May to 鈥渆nd the costly racket of private companies running services for the public.鈥�
Carillion鈥檚 demise is being compared to the impact of the Lehman Brothers鈥� collapse on the banking sector as the reverberations reach further down the supply chain.
Brian Berry chief executive of the Federation of Master Builders warned that the 鈥渄omino effect鈥� is already underway.
鈥淭his is the biggest thing that鈥檚 hit the construction industry since I can remember; it鈥檚 got the potential to be a disaster.鈥�
Thousands of suppliers are owed money by Carillion, many of which are having to lay off workers as banks call in their debts. Shareholders are also among those suffering severe losses.
Along with the Qatar contract, three UK joint public and private contracts are also being blamed for the collapse. Two were for new hospitals and another for a road project in Scotland.