p-wc

Rt Hon Frank Field MP Work & Pensions Committee House of Commons Westminster SWlA oAA

Rachel Reeves MP Business, Energy and Industrial Strategy Committee House of Commons Westminster SWlA oAA

2 February 2018

Dear Mr Field and Ms Reeves

Carillion inquiry

I write in response to your letter of 25 January 2018 addressed to Mr Kevin Ellis which asked for details of PwC's engagements with Pk and any subsidiaries of Carillion Plc, details of PwC engagements in relation to the Carillion Pension Plan and details of PwC's engagements with the Government in relation to Carillion Plc and its subsidiaries over the ten year period since 2008. Details are set out in the attached appendices as follows:

1. Appendix 1 - engagements between PwC LLP, Carillion Plc and its subsidiaries, by reference to its subsidiaries as they are listed in the Carillion Annual Report and Accounts 2016;

2. Appendix 2 - engagements by PwC LLP in relation to the Carillion Pension schemes; and

3. Appendix 3 - engagements between PwC LLP and the UK Government in relation to Carillion Plc and its subsidiaries.

The following points explain the approach we have taken in preparing this response:

1. Client confidentiality - we are keen to assist the members of the Joint Committee with their inquiry but it is appropriate that I flag the issue of client confidentiality as discussed with the clerk to the Joint Committee on 31 January 2018. In order to preserve confidentiality we have grouped some engagements together and anonymised any other parties to engagements.

2. Changes to Carillion group structure - the Carillion group structure is large and complex with operations in Europe, Canada, the Middle East, North Africa and the Caribbean. By way of example, the Carillion 2016 annual report lists over 350 subsidiaries and joint ventures. There has been significant change in this structure over the ten year period since 2008 including numerous acquisitions, joint ventures and disposals. We have carried out a comprehensive search of PwC LLP's systems but given the complexity of the Carillion group it is possible that some engagements may not have been identified.

3. Search of PwC UK's systems - in the time available, we have focused on providing details of significant engagements and have amalgamated others ofless significance. The approach which we have adopted for each category of the request is as follows:

PricewaterhouseCoopers LLP, 1 Embankment Place, WC2N 6RH T; +44 (o) 20 7583 5000, F: +44 (o) 20 7822 4652, www.pwc.co.uk

PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH. PricewaterhouseCoopers LLP Is authorised and regulated by the Financial Services Aulhority for designated investment business. pwc

3.1. Engagements between PwC LLP, Carillion Plc and its subsidiaries (Appendix 1) - we have focused on the Carillion entities as listed in the Carillion Annual Report and Accounts 2016;

3.2. Engagements by PwC LLP in relation to the Carillion Pension schemes (Appendix 2) - we have reviewed and provided information in relation to those pension schemes of which we are aware and in respect of which Carillion Plc and/or its subsidiaries were the sponsoring employer (including multiple employer pension schemes);

3.3. Engagements between PwC LLP and the UK Government in relation to Carillion Plc and its subsidiaries (Appendix 3) - we have focused on those Carillion entities within the scope of the Official Receiver and the Provisional Liquidators as at 27 January 2018. The list of entities within this scope is likely to change as the insolvency progresses.

4. PwC LLP in the UK - we have focused on engagements undertaken by PwC LLP. PwC LLP is a member of the PwC international network of member firms. Each member firm is a separate legal entity. Other firms in the PwC network may have had connections with the Carillion group given the international nature of the group's contracts, consortia and joint ventures.

As you will know, six partners of PwC LLP have been appointed as Special Managers to assist the Official Receiver in the liquidation of Carillion entities. We have not discussed this response with them in order to maintain separation between their appointment and the provision of services by PwC LLP.

Ifyou have any questions about this letter or the information attached to it, please contact me.

Yours sincerely

Margaret Cole General Counsel Appendix 1 - Carillion Pie and subsidiaries: Services provided by PwC LLP (UK firm) for 2008* to date

The following services have been provided by PwC LLP (UK Firm) to the Carillion group (the "group"). In order to provide the information below we have considered the group to be those entities set out in the Carillion Annual Report and Accounts 2016.

Service Type Date Range Summary ofservices provided Total Fees - Net Audit 1 July 2007 - 30 June 2013 Statutory audit in respect Alfred McAlpine plc and EAGA plc and their £1,474k respective subsidiaries. Alfred McAlpine plc was acquired by the group in 2008; EAGA pie was acquired by the group in 2011.

1 July 2015 - 30 June 2017 Non-statutory audit of a fund of which the group owns 22%. £155k

Completion Accounts 1 July 2009 - 30 June 2010 Post-deal accounting advisory services performed in relation to an £135k acquisition by the group.

Corporate Finance - Consortium 1 July 2007 - 30 June 2010 Commercial and financial advice to a consortium including Carillion in £74ok relation to their bid for the South Tyneside & Gateshead Building Schools for the Future programme.

Cyber 1 July 2008 ­ 30 June 2009 Penetration testing and other cyber advice £77k 1 July 2010 - 30 June 2011 1 July 2013 - 30 June 2015

Data Assurance 1 July 2011 ­ 30 June 2013 Advisory services performed to assist group entities in resolving data £361k 1 July 2014 - 30 June 2015 quality issues.

Dispute 1 July 2007 - 30 June 2009 Dispute resolution services: Acting as an expert witness; and providing £426k 1 July 2015 - 30 June 2016 financial analysis in connection with a contract dispute.

Internal Audit 1 July 2007 - 30 June 2009 Advisory services to support the group in exploring data audit techniques. £25k

IT Systems Support 1 July 2007 - 30 June 2010 Technical support in connection with Oracle and review services related to £201k 1 July 2014 - 30 June 2015 data centre resilience.

Pensions Consulting Advice 1 July 2012 - 30 June 2015 Advice to the group regarding options to manage scheme liabilities. The £2,857k advice considered options to hedge the scheme's exposure to interest rates, inflation and longevity. PwC worked alongside other professional advisers in providing the services which involved assisting the group in discussions with the trustee. The decision whether or not to implement any of the options was made by the trustee ( who was separately advised).

1 July 2015 - 30 June 2017 Reviewing options to restructure the existing longevity swap.

•references to 2007 reflects the PwC financial year which runs from 1July 2oox to 30 June 2oox+1. Appendix 1 - Carillion Pie and subsidiaries: Services provided by PwC LLP (UK firm) for 2008* to date

Project Management Office 1 July 2014 - 30 June 2015 Project Management Office advisory services in connection with a joint £535k venture including the group.

Secondment 1 July 2007 ­ 30 June 2011 Secondment of PwC staff into Carillion group. At different points in time £378k 1 July 2012 - 30 June 2014 PwC staff were seconded in to the internal audit and finance functions and to support mergers and acquisitions activity.

Tax Advisory 1 July 2012 - 30 June 2013 Tax advisory services in respect of a fund ofwhich the group held 22%. £10k

Tax Compliance - Group 1 July 2007 ­ 30 June 2010 Tax compliance services provided to the group. £289k

Tax Compliance - JV 1 July 2016 - to date Tax compliance services provided to one of the group's joint ventures. £5ok

Tax Consulting 1 July 2007 ­ 30 June 2009 Tax consulting services in respect of VAT liabilities. £87k

Tax Structuring 1 July 2012 - 30 June 2014 Tax structuring advice relating to group acquisitions: £35k

Transaction Services 1July 2008 ­ 30 June 2010 Due diligence services in connection with divestments and acquisitions £653k 1July 2011 - 30 June 2012 across the group. 1July 2014 - 30 June 2015

Valuation 1 July 2010 - 30 June 2011 Review of a group prepared valuation in respect of a joint venture. £19k

Vendor Assistance 1July 2009 ­ 30 June 2010 Pre-transaction preparation with respect to sale of a group subsidiary. £66k

Total Fees (excluding VAT) £8,572k

Fees for the group for the period FYo8 - FY18

FY refers to PwC financial period 1July - 30 June (e.g. FY18 is the period 1 July 2017 - 30 June 2018)

FYo8 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 Total Fees - Net £1,647k £878k £1,252k £428k £344k £805k £1,2ook £1,512k £249k £221k £37k £8,572k

•references to 2007 reflects the PwC financial year which runs from 1 July 2oox to 30 June 2oox+1. Appendix 2 - Carillion Pension Schemes: Services provided by PwC LLP (UK firm) for 2008* to date

We are aware that the Carillion group was sponsoring employer to a number of pension schemes1 and while we have searched against all of those listed below, this list may not be exhaustive. PwC LLP (UK firm) provided services to some of the Carillion pension schemes (as identified in the tables below).

The Electricity Supply Pension Scheme and Railways Pensions Schemes are segregated multiple employer schemes. Services provided to these multiple schemes were not for the sole benefit of the Carillion group.

The services provided to Carillion (DB) Pension Trust are_in respect ofthe 6 schemes set out below which were single trustee schemes.

Carillion (DB) Pension Trustee

Entity Service Type Date Range Summary ofservices provided Total Fees -Net

Carillion (DB) Pension Trustee Pension covenant advisory 1 July 2017- to date Covenant advisory services to the trustees responding to an £975k in respect of: services approach from the group seeking to agree a deferral of payments to the schemes. • Carillion Staff Pension Scheme Advisory services to the trustees in respect ofthe group's • Carillion B Pension Scheme restructuring proposals. • Mowlem Staff Pension and Life Assurance Scheme These services are largely completed. • Alfred McAlpine Pension Plan • Planned Maintenance Engineering Limited Staff Pension and Assurance Scheme • Bower Group Retirement Benefits Scheme

Total Fees (excluding VAT) £975k

1 Carillion Staff Pension Scheme; Carillion B Pension Scheme; Mowlem Staff Pension and Life Assurance Scheme; Alfred McAlpine Pension Plan; Planned Maintenance Engineering Limited Staff Pension and Assurance Scheme; Bower Group Retirement Benefits Scheme; Mowlem (1993) Pension Scheme; Electricity Supply Pension Scheme; Railways Pension Scheme - GTRM Section; Railways Pension Scheme Centrac Section; Carillion Public Sector Pension Scheme; Permarock Products Pension Scheme; Prudential Platinum.

• references to 2007 reflects the PwC financial year which runs from 1 July 2oox to 30 June 2oox+1. Appendix 2 - Carillion Pension Schemes: Services provided by PwC LLP (UK firm) for 2008* to date

Electricity Supply Pension Scheme (multiple employer scheme)

Entity Service Type Date Range Summary ofservices provided Total Fees - Net .. Electricity Suppiy Pension Audit 1 July 2008 ­ to date Statutory audit. £4,496k Scheme

Electricity Supply Pension Corporate simplification 1 July 2010 - 30 June 2012 Solvent liquidation of entities held in trust by the scheme. £64k Scheme

Electricity Supply Pension Tax 1 July 2016 - 30 June 2017 Tax advisory services. £5ok Scheme

Electricity Supply Pension Cyber security 1 July 2017 - 30 September 2017 Identification of information security risks. £12k Scheme

Electricity Supply Pension Controls review 1 July 2009 ­ 30 June 2010 Review ofbanking processes. £15k Scheme

Total Fees (excluding VAT) £4,637k

Railways Pensions Trustee Company (multiple employer scheme)

Entity Service Type Date Range Summary ofservices provided Total Fees - Net

Railways Pensions Trustee Pension covenant advisory services 1 July 2008 ­ 30 June 2011 Covenant advisory services in respect of each of the multiple £445k Company employers that participate in the scheme.

Total Fees (excluding VAT) £445k

Total Fees Summary Entity Total Fees - Net Carillion (DB) Pension Trustee £975k Electricity Supply Pension Scheme £4,637k Railways Pensions Trustee Company £445k £6,057k

*references to 2007 reflects the PwC financial year which runs from 1July 2oox to 30 June 2oox+1. Appendix 2 - Carillion Pension Schemes: Services provided by PwC LLP (UK firm) for 2008* to date

Fees for the Carillion pension schemes for the period FYo8 - FY18

FY refers to PwC financial period 1 July - 30 June (e.g. FY18 is the period 1 July 2017 - 30 June 2018)

FYo8 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY182 Total Fees - Net £102k £537k £474k £729k £7.37k £525k £481k £512k £413k £418k £1,128k £6,057k

2 The figure for FY18 includes fees of £975k for pension covenant advisory services as set out in the table headed "Carillion (DB) Pension Trustee"

•references to 2007 reflects the PwC financial year which runs from 1July 2oox to 30 June 2oox+1. Appendix 3 - Government Contracts: Services provided by PwC LLP (UK firm) relating to contracts with Carillion for 2008 to date

- ··- Govemmentdepartment Date ofengagement Summary ofservices provided Total Fees - Neta

Insolvency Services January 2018 PwC is providing forensic support to the Official Receiver. Just commenced

Ministry of Justice November 2017 - to date PwC is providing advice on MoJ's contingency plan in relation to Carillion's prison contract and £10ok support with execution of the plan post-insolvency.

Ministry of Defence November to December 2017 PwC provided advice on MoD contingency planning in respect of several Carillion contracts. £10ok

Cabinet Office September 2017 - to date PwC provided advice on the Government's exposure to Carillion's financial difficulties and its £625k contingency planning.

Ministry of Justice March to April 2017 PwC was engaged by the Government Internal Audit Agency (GIAA) on behalf of MoJ to look at Less than £6ok Courts' PFI contracts. Carillion was not party to any of the contracts but in relation to two of them, Carillion provided the Facilities Management services.

Network Rail 2016 PwC undertook a performance review of certain Network Rail (NR) project teams in order to £191k understand drivers of good and bad performance within NR. Carillion was the framework contractor for one of the NR teams reviewed. PwC issued a report setting out recommendations in respect ofthe NR teams' performance, including in relation to contractor management.

Ministry of Justice December 2014 to November PwC provided advice to MoJ on its internal contract management processes relating to a number £1,sook 2016 of outsourced contracts. Some of these contracts, specifically the prisons facilities management contracts, had Carillion in the supply chain.

Ministry of Defence November 2013 to March 2017 In the period up to 2006, PwC advised MoD on the tender process and contract close of a PPP £926k project. The project was awarded to a major contractor ("X") with Carillion having subsequent involvement as a shareholder in X, and as joint venture partners with another contractor ("Y'') in the subcontractor entities established to deliver the works and services aspects of the scheme. Since that time, PwC has been retained under a series of appointments to support MoD in various activities'.

3 Given the timeframe in which we have been asked to respond, some of the fees stated are approximations Appendix 3 - Government Contracts: Services provided by PwC LLP (UKfirm) relating to contracts with Carillion for 2008 to date

Over the period 2014-2016 PwC also advised MoD on a broader 'PFI Efficiency' review and on the structuring of a works and services variation with X in relation to the same project. The existing joint ventures between Carillion and Y were subcontracted by X to deliver the related works and services respectively.

Ministry of Defence 2013 to 2015 As part of MoD's PFI review programme, PwC reviewed the Northwood PFI financial model and £98k contractual documentation to identify potential efficiency savings in the PFI contract. PwC assisted in reviewing savings proposals presented by the PFI contractor ("A"). As part of the review, efficiencies were identified and agreed with A. Carillion is a services subcontractor to A.

Transport Scotland (executive April 2012 ­ to date In the period between April 2012 and December 2014, PwC advised Transport Scotland (TS) on £1,10ok agency of the Scottish the preparation of a Business Case, the tender process and the financial/contract close of an Government) Aberdeen roads project. The project was awarded to a consortium of three organisations, one of which was Carillion, each having a 1/3 share in the equity in the Special Purpose Vehicle ("SPV') established to deliver the project and the joint venture established to deliver the works. Since financial close in December 2014, PwC has provided ad hoe post deal services.

Portsmouth Hospitals NHS Trust 2010 PwC carried out a review of a PFI project financial model on behalf of the Trust in relation to a £18k project awarded to an SPV. Carillion was a member ofthe SPV.

Oxford Radcliffe Hospitals NHS 2010 PwC was appointed via a law firm to review a Deemed Service Variation claim submitted by £83k Trust Carillion Services Limited in relation to the Facilities Management element of the PFI contract. PwC prepared an initial report.

Royal School of Military Project closed in 2008 but post PwC acted as financial advisors in relation to the procurement of the PPP partner for the Royal £1,6ook Engineering deal support provided in 2009, School of Military Engineering PPP where Carillion were construction sub-contractor. 2010 and 2015

Highways England January ­ March 2015 PwC provided services to Highways England in connection with the Smart Motorways Programme. £125k The services supported the development of the commercial and procurement strategy. PwC did not support the procurement activity, which was led by Highways England, through which a joint venture involving Carillion won construction work.

Total Fees (excluding VAT) £6,5ook