Britain to toughen outsourcer contracts after Carillion collapse

(Reuters) - Britain is preparing to toughen up contract terms for private companies operating in the public sector and to enhance competition after the collapse of outsourcing group Carillion earlier this year.

Cabinet minister David Lidington said on Monday he was seeking to make it easier for smaller companies, charities and social enterprises to take on large government contracts, and would demand more of public service providers, both in terms of transparency and in social awareness.

Carillion collapsed in January when its banks halted its funding, triggering a row over Britain’s outsourcing of public services to private companies.

Lidington said companies like Capita (CPI.L), Serco (SRP.L) and Mitie (MTO.L), which also take on government contracts, would need to become more agile in a crisis, provide more data on their performance and publish performance indicators.

Key suppliers would be required to develop "living wills" to allow contingency plans to be rapidly put into place if needed.

Lidington said the government would use its muscle as the provider of 200 billion pounds ($265.36 billion) worth of public services annually to push companies to increase transparency for major contracts and introduce enhanced measures to protect suppliers from cyber attacks, as well as hitting social and diversity targets.

A Serco spokesman said he welcomed the measures and said the company had been pushing for some of them since Carillion collapsed in January becoming Britain's largest construction bankruptcy.

($1 = 0.7537 pounds)

(Writing by Elisabeth O'Leary. Editing by Jane Merriman)