Labour is preparing to force a binding vote in the Commons requiring ministers to hand over their risk assessments for Carillion before the company went bust.
The shadow business secretary has told Sky News she suspects departments did not follow correct procedures after the infrastructure company issued profit warnings.
Rebecca Long Bailey said: “The Government’s specific guidance from its Strategic Risk Management policy states that where a company issued a profit warning government departments should be advised to refrain from awarding contracts to that company in the future.
“Despite not just one profit warning, but three profit warnings, the Government went on to award over £2bn worth of contracts to Carillion.”
Carillion went into liquidation last week leaving uncertainty for government contacts and thousands of jobs.
Under Whitehall guidelines a company is considered “High Risk” if it issues “a profits warning to a stock exchange”.
In response the Government’s “Crown Representative” is required work with the company to develop a strategy – an “Improvement Plan”.
In an opposition day debate Labour will call on the Government to reveal documents relating to these improvement plans.
Labour’s motion will use the same Parliamentary procedure as it did to force the Government to produce the Brexit impact assessments.
Labour will demand the papers be released to the House of Commons’ Public Accounts Committee which would then have the right to review the material and determine what information is put in the public domain.
Labour will argue that with Carillion, not only is there no evidence these strategic plans wereimplemented, but at times there wasn’t a Crown Representative overseeing the situation.
However, taking HS2 as an example, the department of transport argues that when the Carillion contract was entered into, there may have been a profit warning, but it wasn’t a single company contract.
HS2 was as a joint venture with other companies that came with assurances that the others would act as a safety net if one went bust.
A Government spokesperson said: “We closely monitor the financial situation of all of our strategic suppliers.
“There is a clear policy on how the Government manages suppliers, including for those that are deemed high risk, a requirement to submit an improvement plan.
“But it is not only this policy that allows Government to deal with suppliers in financial distress.
“Large contracts contain clauses that allow the contracting customer to terminate the agreement if necessary, and financial tests are applied during procurement to exclude suppliers who don’t have the financial capacity to execute the contract.”