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The real reason that Carillion collapsed

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The collapse of government contractor Carillion will spread havoc. Sympathy for its creditors may not be overwhelming. But the impact on those who depended on its pension fund for their retirement income, and on its suppliers who will likely also go bust, is shocking.

There are doubtless many complex reasons for the firm’s collapse. It seems that the government failed in its due diligence on the company when awarding the latest contracts. But there is one aspect that has not yet been much discussed – the process of public procurement and its consequences.

Public procurement has become one huge exercise in bureaucracy. Public servants, mindful of the potential for many a slip in the award of public procurement contracts, have made the process ever more Byzantine. If Carillion is anything to go by, the process may be complicated but it’s clearly not effective at preventing this sort of debacle. It has become the typical bureaucratic nightmare – lots of box-ticking that signifies very little. An outward appearance of thoroughness which is, in the end, hollow. Much like many of the box-ticking regulations that are supposed to make banks safer, but do very little except swell the ranks of compliance departments.

But there are other consequences of these impenetrable processes. They mean that only the largest companies can possibly ever work their way through them. And once they have worked through them and become approved as government contractors, there is little incentive for government officials to keep approving more and more contractors. So much easier to load more and more contracts on to those few companies that are already approved.

Finally, in an age of austerity, the tendering process is designed to push contract prices as low as possible. This makes companies cut as many corners as possible in an attempt to make the contracts even marginally profitable. And when they are not profitable the luckier ones bail out (cf Virgin Trains) or go bust.

The result is Carillion. A company that won several government contracts in varied areas of public services. A company that kept bidding for huge contracts at prices that it could not deliver profitably. When it collapses, the reverberations run across a number of public services because it was so omnipresent.

It is one of the realities of life that, however good one’s due diligence, it can never be perfect. Things will always slip through. Finance teaches us that the best way to mitigate the inevitable risks associated with uncertainty is through diversification – to avoid putting all one’s eggs in one basket. No amount of thoroughness can avoid crises and collapses. Therefore diversification is the best protection.

And it is here that the bureaucracy has failed. It tries to minimise risk by increasing the burden of what it takes to apply for public contracts. There is nothing inherently wrong with being thorough. As long as one accepts that no amount of thoroughness will suffice and that diversification is an essential part of risk management.

Rather than concentrating so many public contracts in so few giant corporations, public procurement must be diversified. The process must be such that smaller companies – preferably companies that have roots in the communities where services are being offered – can credibly bid for contracts and win them. Of course, some of these smaller companies will also go bust. But the impact of that will be much less than when a large company, with its tentacles in public services ranging from schools and hospitals to HS2, eventually collapses.

As we have seen with the banks, size is no guarantee against collapse. It is time that our civil servants stopped running processes designed for their own benefit by contracting only with a few giant companies and embarked on the harder work of opening up public services to a more varied palette of companies.

Oh! And we mustn’t forget. The Treasury’s role must go beyond trying to squeeze as much as possible out of its suppliers for the lowest possible cost (the blinkered and destructive attitude of all procurement departments everywhere). It has a moral as well as practical duty to ensure that the government pays a fair wage for a fair day’s work.

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Radix is the radical centre think tank. We welcome all contributions which promote system change, challenge established notions and re-imagine our societies. The views expressed here are those of the individual contributor and not necessarily shared by Radix.

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You may withdraw this consent at any time by <a href="mailto:[email protected]">emailing us</a> or clicking “unsubscribe” at the bottom of our emails).</label> </li></ul></div></li><li id='field_2_6' class='gfield gform_validation_container field_sublabel_below field_description_below gfield_visibility_visible' ><label class='gfield_label' for='input_2_6' >Comments</label><div class='ginput_container'><input name='input_6' id='input_2_6' type='text' value='' autocomplete='off'/></div><div class='gfield_description' id='gfield_description__6'>This field is for validation purposes and should be left unchanged.</div></li> </ul></div> <div class='gform_footer top_label'> <input type='submit' id='gform_submit_button_2' class='gform_button button' value='SUBSCRIBE' tabindex='76' onclick='if(window["gf_submitting_2"]){return false;} if( !jQuery("#gform_2")[0].checkValidity || jQuery("#gform_2")[0].checkValidity()){window["gf_submitting_2"]=true;} ' onkeypress='if( event.keyCode == 13 ){ if(window["gf_submitting_2"]){return false;} if( !jQuery("#gform_2")[0].checkValidity || jQuery("#gform_2")[0].checkValidity()){window["gf_submitting_2"]=true;} jQuery("#gform_2").trigger("submit",[true]); }' /> <input type='hidden' name='gform_ajax' value='form_id=2&amp;title=&amp;description=&amp;tabindex=69' /> <input type='hidden' class='gform_hidden' name='is_submit_2' value='1' /> <input type='hidden' class='gform_hidden' name='gform_submit' value='2' /> <input type='hidden' class='gform_hidden' name='gform_unique_id' value='' /> <input type='hidden' class='gform_hidden' name='state_2' value='WyJbXSIsIjg1ZGYwZWM3YzAyMDRmYTcyZDYxNmIwMWJiNmFhYzVhIl0=' /> <input type='hidden' class='gform_hidden' name='gform_target_page_number_2' id='gform_target_page_number_2' value='0' /> <input type='hidden' class='gform_hidden' name='gform_source_page_number_2' id='gform_source_page_number_2' value='1' /> <input type='hidden' name='gform_field_values' value='' /> </div> </form> </div> <iframe style='display:none;width:0px;height:0px;' src='about:blank' name='gform_ajax_frame_2' id='gform_ajax_frame_2' title='This iframe contains the logic required to handle Ajax powered Gravity Forms.'></iframe> <script type='text/javascript'>jQuery(document).ready(function($){gformInitSpinner( 2, 'https://radixuk.org/wp-content/plugins/gravityforms/images/spinner.gif' );jQuery('#gform_ajax_frame_2').on('load',function(){var contents = jQuery(this).contents().find('*').html();var is_postback = contents.indexOf('GF_AJAX_POSTBACK') >= 0;if(!is_postback){return;}var form_content = jQuery(this).contents().find('#gform_wrapper_2');var is_confirmation = jQuery(this).contents().find('#gform_confirmation_wrapper_2').length > 0;var is_redirect = contents.indexOf('gformRedirect(){') >= 0;var is_form = form_content.length > 0 && ! is_redirect && ! is_confirmation;var mt = parseInt(jQuery('html').css('margin-top'), 10) + parseInt(jQuery('body').css('margin-top'), 10) + 100;if(is_form){jQuery('#gform_wrapper_2').html(form_content.html());if(form_content.hasClass('gform_validation_error')){jQuery('#gform_wrapper_2').addClass('gform_validation_error');} else {jQuery('#gform_wrapper_2').removeClass('gform_validation_error');}setTimeout( function() { /* delay the scroll by 50 milliseconds to fix a bug in chrome */ jQuery(document).scrollTop(jQuery('#gform_wrapper_2').offset().top - mt); }, 50 );if(window['gformInitDatepicker']) {gformInitDatepicker();}if(window['gformInitPriceFields']) {gformInitPriceFields();}var current_page = jQuery('#gform_source_page_number_2').val();gformInitSpinner( 2, 'https://radixuk.org/wp-content/plugins/gravityforms/images/spinner.gif' );jQuery(document).trigger('gform_page_loaded', [2, current_page]);window['gf_submitting_2'] = false;}else if(!is_redirect){var confirmation_content = jQuery(this).contents().find('.GF_AJAX_POSTBACK').html();if(!confirmation_content){confirmation_content = contents;}setTimeout(function(){jQuery('#gform_wrapper_2').replaceWith(confirmation_content);jQuery(document).scrollTop(jQuery('#gf_2').offset().top - mt);jQuery(document).trigger('gform_confirmation_loaded', [2]);window['gf_submitting_2'] = false;}, 50);}else{jQuery('#gform_2').append(contents);if(window['gformRedirect']) {gformRedirect();}}jQuery(document).trigger('gform_post_render', [2, current_page]);} );} );</script><script type='text/javascript'> jQuery(document).bind('gform_post_render', function(event, formId, currentPage){if(formId == 2) {if(typeof Placeholders != 'undefined'){ Placeholders.enable(); }} } );jQuery(document).bind('gform_post_conditional_logic', function(event, formId, fields, isInit){} );</script><script type='text/javascript'> jQuery(document).ready(function(){jQuery(document).trigger('gform_post_render', [2, 1]) } ); </script>
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[gravityform id=5 title=false description=false ajax=true tabindex=64]
<div class='gf_browser_unknown gform_wrapper' id='gform_wrapper_5' ><div id='gf_5' class='gform_anchor' tabindex='-1'></div><form method='post' enctype='multipart/form-data' target='gform_ajax_frame_5' id='gform_5' action='/opinion/real-reason-carillion-collapsed/#gf_5'> <div class='gform_body'><ul id='gform_fields_5' class='gform_fields top_label form_sublabel_below description_below'><li id='field_5_5' class='gfield gravity_head gfield_html gfield_html_formatted gfield_no_follows_desc field_sublabel_below field_description_below gfield_visibility_visible' ><h3>Get emails</h3></li><li id='field_5_1' class='gfield gfield_contains_required field_sublabel_hidden_label field_description_below hidden_label gfield_visibility_visible' ><label class='gfield_label gfield_label_before_complex' >Name<span class='gfield_required'>*</span></label><div class='ginput_complex ginput_container no_prefix has_first_name no_middle_name has_last_name no_suffix gf_name_has_2 ginput_container_name' id='input_5_1'> <span id='input_5_1_3_container' class='name_first' > <input type='text' name='input_1.3' id='input_5_1_3' value='' aria-label='First name' tabindex='65' aria-required="true" aria-invalid="false" placeholder='First Name*'/> <label for='input_5_1_3' class='hidden_sub_label screen-reader-text'>First</label> </span> <span id='input_5_1_6_container' class='name_last' > <input type='text' name='input_1.6' id='input_5_1_6' value='' aria-label='Last name' tabindex='67' aria-required="true" aria-invalid="false" placeholder='Last Name*'/> <label for='input_5_1_6' class='hidden_sub_label screen-reader-text'>Last</label> </span> </div></li><li id='field_5_2' class='gfield gfield_contains_required field_sublabel_below field_description_below hidden_label gfield_visibility_visible' ><label class='gfield_label' for='input_5_2' >Email<span class='gfield_required'>*</span></label><div class='ginput_container ginput_container_email'> <input name='input_2' id='input_5_2' type='email' value='' class='large' tabindex='69' placeholder='Email*' aria-required="true" aria-invalid="false" /> </div></li><li id='field_5_4' class='gfield gf-conf-check gfield_contains_required field_sublabel_below field_description_below hidden_label gfield_visibility_visible' ><label class='gfield_label' >Confirmation<span class='gfield_required'>*</span></label><div class='ginput_container ginput_container_checkbox'><ul class='gfield_checkbox' id='input_5_4'><li class='gchoice_5_4_1'> <input name='input_4.1' type='checkbox' value='Consent' id='choice_5_4_1' tabindex='70' /> <label for='choice_5_4_1' id='label_5_4_1'>Please keep me updated on new website content and Radix news. (We will process your data in accordance with our <span class="pp"><a href="https://radixuk.org/privacy-policy/">Privacy Policy</a></span>. You may withdraw this consent at any time by <a href="mailto:[email protected]">emailing us</a> or clicking “unsubscribe” at the bottom of our emails).</label> </li></ul></div></li><li id='field_5_6' class='gfield gform_validation_container field_sublabel_below field_description_below gfield_visibility_visible' ><label class='gfield_label' for='input_5_6' >Phone</label><div class='ginput_container'><input name='input_6' id='input_5_6' type='text' value='' autocomplete='off'/></div><div class='gfield_description' id='gfield_description__6'>This field is for validation purposes and should be left unchanged.</div></li> </ul></div> <div class='gform_footer top_label'> <input type='submit' id='gform_submit_button_5' class='gform_button button' value='SUBSCRIBE' tabindex='71' onclick='if(window["gf_submitting_5"]){return false;} if( !jQuery("#gform_5")[0].checkValidity || jQuery("#gform_5")[0].checkValidity()){window["gf_submitting_5"]=true;} ' onkeypress='if( event.keyCode == 13 ){ if(window["gf_submitting_5"]){return false;} if( !jQuery("#gform_5")[0].checkValidity || jQuery("#gform_5")[0].checkValidity()){window["gf_submitting_5"]=true;} jQuery("#gform_5").trigger("submit",[true]); }' /> <input type='hidden' name='gform_ajax' value='form_id=5&amp;title=&amp;description=&amp;tabindex=64' /> <input type='hidden' class='gform_hidden' name='is_submit_5' value='1' /> <input type='hidden' class='gform_hidden' name='gform_submit' value='5' /> <input type='hidden' class='gform_hidden' name='gform_unique_id' value='' /> <input type='hidden' class='gform_hidden' name='state_5' value='WyJbXSIsIjg1ZGYwZWM3YzAyMDRmYTcyZDYxNmIwMWJiNmFhYzVhIl0=' /> <input type='hidden' class='gform_hidden' name='gform_target_page_number_5' id='gform_target_page_number_5' value='0' /> <input type='hidden' class='gform_hidden' name='gform_source_page_number_5' id='gform_source_page_number_5' value='1' /> <input type='hidden' name='gform_field_values' value='' /> </div> </form> </div> <iframe style='display:none;width:0px;height:0px;' src='about:blank' name='gform_ajax_frame_5' id='gform_ajax_frame_5' title='This iframe contains the logic required to handle Ajax powered Gravity Forms.'></iframe> <script type='text/javascript'>jQuery(document).ready(function($){gformInitSpinner( 5, 'https://radixuk.org/wp-content/plugins/gravityforms/images/spinner.gif' );jQuery('#gform_ajax_frame_5').on('load',function(){var contents = jQuery(this).contents().find('*').html();var is_postback = contents.indexOf('GF_AJAX_POSTBACK') >= 0;if(!is_postback){return;}var form_content = jQuery(this).contents().find('#gform_wrapper_5');var is_confirmation = jQuery(this).contents().find('#gform_confirmation_wrapper_5').length > 0;var is_redirect = contents.indexOf('gformRedirect(){') >= 0;var is_form = form_content.length > 0 && ! is_redirect && ! is_confirmation;var mt = parseInt(jQuery('html').css('margin-top'), 10) + parseInt(jQuery('body').css('margin-top'), 10) + 100;if(is_form){jQuery('#gform_wrapper_5').html(form_content.html());if(form_content.hasClass('gform_validation_error')){jQuery('#gform_wrapper_5').addClass('gform_validation_error');} else {jQuery('#gform_wrapper_5').removeClass('gform_validation_error');}setTimeout( function() { /* delay the scroll by 50 milliseconds to fix a bug in chrome */ jQuery(document).scrollTop(jQuery('#gform_wrapper_5').offset().top - mt); }, 50 );if(window['gformInitDatepicker']) {gformInitDatepicker();}if(window['gformInitPriceFields']) {gformInitPriceFields();}var current_page = jQuery('#gform_source_page_number_5').val();gformInitSpinner( 5, 'https://radixuk.org/wp-content/plugins/gravityforms/images/spinner.gif' );jQuery(document).trigger('gform_page_loaded', [5, current_page]);window['gf_submitting_5'] = false;}else if(!is_redirect){var confirmation_content = jQuery(this).contents().find('.GF_AJAX_POSTBACK').html();if(!confirmation_content){confirmation_content = contents;}setTimeout(function(){jQuery('#gform_wrapper_5').replaceWith(confirmation_content);jQuery(document).scrollTop(jQuery('#gf_5').offset().top - mt);jQuery(document).trigger('gform_confirmation_loaded', [5]);window['gf_submitting_5'] = false;}, 50);}else{jQuery('#gform_5').append(contents);if(window['gformRedirect']) {gformRedirect();}}jQuery(document).trigger('gform_post_render', [5, current_page]);} );} );</script><script type='text/javascript'> jQuery(document).bind('gform_post_render', function(event, formId, currentPage){if(formId == 5) {if(typeof Placeholders != 'undefined'){ Placeholders.enable(); }} } );jQuery(document).bind('gform_post_conditional_logic', function(event, formId, fields, isInit){} );</script><script type='text/javascript'> jQuery(document).ready(function(){jQuery(document).trigger('gform_post_render', [5, 1]) } ); </script>
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[gravityform id=6 title=false description=false ajax=true tabindex=999]
<div class='gf_browser_unknown gform_wrapper' id='gform_wrapper_6' ><div id='gf_6' class='gform_anchor' tabindex='-1'></div><form method='post' enctype='multipart/form-data' target='gform_ajax_frame_6' id='gform_6' action='/opinion/real-reason-carillion-collapsed/#gf_6'> <div class='gform_body'><ul id='gform_fields_6' class='gform_fields top_label form_sublabel_below description_below'><li id='field_6_5' class='gfield gravity_head gfield_html gfield_html_formatted gfield_no_follows_desc field_sublabel_below field_description_below gfield_visibility_visible' ><h3>Before you go!</h3> <p>Stay up to date with what's happening at Radix. Get email notifications</p></li><li id='field_6_1' class='gfield gfield_contains_required field_sublabel_hidden_label field_description_below hidden_label gfield_visibility_visible' ><label class='gfield_label gfield_label_before_complex' >Name<span class='gfield_required'>*</span></label><div class='ginput_complex ginput_container no_prefix has_first_name no_middle_name has_last_name no_suffix gf_name_has_2 ginput_container_name' id='input_6_1'> <span id='input_6_1_3_container' class='name_first' > <input type='text' name='input_1.3' id='input_6_1_3' value='' aria-label='First name' tabindex='1000' aria-required="true" aria-invalid="false" placeholder='First Name*'/> <label for='input_6_1_3' class='hidden_sub_label screen-reader-text'>First</label> </span> <span id='input_6_1_6_container' class='name_last' > <input type='text' name='input_1.6' id='input_6_1_6' value='' aria-label='Last name' tabindex='1002' aria-required="true" aria-invalid="false" placeholder='Last Name*'/> <label for='input_6_1_6' class='hidden_sub_label screen-reader-text'>Last</label> </span> </div></li><li id='field_6_2' class='gfield gfield_contains_required field_sublabel_below field_description_below hidden_label gfield_visibility_visible' ><label class='gfield_label' for='input_6_2' >Email<span class='gfield_required'>*</span></label><div class='ginput_container ginput_container_email'> <input name='input_2' id='input_6_2' type='email' value='' class='large' tabindex='1004' placeholder='Email*' aria-required="true" aria-invalid="false" /> </div></li><li id='field_6_4' class='gfield gf-conf-check gfield_contains_required field_sublabel_below field_description_below hidden_label gfield_visibility_visible' ><label class='gfield_label' >Confirmation<span class='gfield_required'>*</span></label><div class='ginput_container ginput_container_checkbox'><ul class='gfield_checkbox' id='input_6_4'><li class='gchoice_6_4_1'> <input name='input_4.1' type='checkbox' value='Please keep me updated on new website content and Radix news. (We will process your data in accordance with our <span class="pp"><a href="https://radixuk.org/privacy-policy/">Privacy Policy</a></span>. You may withdraw this consent at any time by &lt;a href=&quot;"mailto:[email protected]"&quot;&gt;emailing us&lt;/a&gt; or clicking “unsubscribe” at the bottom of our emails).' id='choice_6_4_1' tabindex='1005' /> <label for='choice_6_4_1' id='label_6_4_1'>Please keep me updated on new website content and Radix news. (We will process your data in accordance with our <span class="pp"><a href="https://radixuk.org/privacy-policy/">Privacy Policy</a></span>. You may withdraw this consent at any time by <a href="mailto:[email protected]">emailing us</a> or clicking “unsubscribe” at the bottom of our emails).</label> </li></ul></div></li><li id='field_6_6' class='gfield gform_validation_container field_sublabel_below field_description_below gfield_visibility_visible' ><label class='gfield_label' for='input_6_6' >Phone</label><div class='ginput_container'><input name='input_6' id='input_6_6' type='text' value='' autocomplete='off'/></div><div class='gfield_description' id='gfield_description__6'>This field is for validation purposes and should be left unchanged.</div></li> </ul></div> <div class='gform_footer top_label'> <input type='submit' id='gform_submit_button_6' class='gform_button button' value='SUBSCRIBE' tabindex='1006' onclick='if(window["gf_submitting_6"]){return false;} if( !jQuery("#gform_6")[0].checkValidity || jQuery("#gform_6")[0].checkValidity()){window["gf_submitting_6"]=true;} ' onkeypress='if( event.keyCode == 13 ){ if(window["gf_submitting_6"]){return false;} if( !jQuery("#gform_6")[0].checkValidity || jQuery("#gform_6")[0].checkValidity()){window["gf_submitting_6"]=true;} jQuery("#gform_6").trigger("submit",[true]); }' /> <input type='hidden' name='gform_ajax' value='form_id=6&amp;title=&amp;description=&amp;tabindex=999' /> <input type='hidden' class='gform_hidden' name='is_submit_6' value='1' /> <input type='hidden' class='gform_hidden' name='gform_submit' value='6' /> <input type='hidden' class='gform_hidden' name='gform_unique_id' value='' /> <input type='hidden' class='gform_hidden' name='state_6' value='WyJbXSIsIjg1ZGYwZWM3YzAyMDRmYTcyZDYxNmIwMWJiNmFhYzVhIl0=' /> <input type='hidden' class='gform_hidden' name='gform_target_page_number_6' id='gform_target_page_number_6' value='0' /> <input type='hidden' class='gform_hidden' name='gform_source_page_number_6' id='gform_source_page_number_6' value='1' /> <input type='hidden' name='gform_field_values' value='' /> </div> </form> </div> <iframe style='display:none;width:0px;height:0px;' src='about:blank' name='gform_ajax_frame_6' id='gform_ajax_frame_6' title='This iframe contains the logic required to handle Ajax powered Gravity Forms.'></iframe> <script type='text/javascript'>jQuery(document).ready(function($){gformInitSpinner( 6, 'https://radixuk.org/wp-content/plugins/gravityforms/images/spinner.gif' );jQuery('#gform_ajax_frame_6').on('load',function(){var contents = jQuery(this).contents().find('*').html();var is_postback = contents.indexOf('GF_AJAX_POSTBACK') >= 0;if(!is_postback){return;}var form_content = jQuery(this).contents().find('#gform_wrapper_6');var is_confirmation = jQuery(this).contents().find('#gform_confirmation_wrapper_6').length > 0;var is_redirect = contents.indexOf('gformRedirect(){') >= 0;var is_form = form_content.length > 0 && ! is_redirect && ! is_confirmation;var mt = parseInt(jQuery('html').css('margin-top'), 10) + parseInt(jQuery('body').css('margin-top'), 10) + 100;if(is_form){jQuery('#gform_wrapper_6').html(form_content.html());if(form_content.hasClass('gform_validation_error')){jQuery('#gform_wrapper_6').addClass('gform_validation_error');} else {jQuery('#gform_wrapper_6').removeClass('gform_validation_error');}setTimeout( function() { /* delay the scroll by 50 milliseconds to fix a bug in chrome */ jQuery(document).scrollTop(jQuery('#gform_wrapper_6').offset().top - mt); }, 50 );if(window['gformInitDatepicker']) {gformInitDatepicker();}if(window['gformInitPriceFields']) {gformInitPriceFields();}var current_page = jQuery('#gform_source_page_number_6').val();gformInitSpinner( 6, 'https://radixuk.org/wp-content/plugins/gravityforms/images/spinner.gif' );jQuery(document).trigger('gform_page_loaded', [6, current_page]);window['gf_submitting_6'] = false;}else if(!is_redirect){var confirmation_content = jQuery(this).contents().find('.GF_AJAX_POSTBACK').html();if(!confirmation_content){confirmation_content = contents;}setTimeout(function(){jQuery('#gform_wrapper_6').replaceWith(confirmation_content);jQuery(document).scrollTop(jQuery('#gf_6').offset().top - mt);jQuery(document).trigger('gform_confirmation_loaded', [6]);window['gf_submitting_6'] = false;}, 50);}else{jQuery('#gform_6').append(contents);if(window['gformRedirect']) {gformRedirect();}}jQuery(document).trigger('gform_post_render', [6, current_page]);} );} );</script><script type='text/javascript'> jQuery(document).bind('gform_post_render', function(event, formId, currentPage){if(formId == 6) {if(typeof Placeholders != 'undefined'){ Placeholders.enable(); }} } );jQuery(document).bind('gform_post_conditional_logic', function(event, formId, fields, isInit){} );</script><script type='text/javascript'> jQuery(document).ready(function(){jQuery(document).trigger('gform_post_render', [6, 1]) } ); </script>