LBWF’s Internal Audit and Anti-Fraud Team investigates Town Hall procurement of goods and services, and finds disturbing ‘non-compliance with existing Rules’

In late 2019, LBWF’s Internal Audit and Anti-Fraud Team (hereafter IAAFT) completed a report on Town Hall procurement, and surprisingly, given the fact that each year this involves many millions of pounds’ worth of goods and services, concluded that it was only deserving of ‘limited assurance’, with two of the five component findings about risk rated ‘high’ (‘Key targets missed, some services compromised…Service budgets exceeded…Significant breach in laws and regulations resulting in significant…consequences’).

The IAAFT investigation was based upon a forensic examination of five procurement contracts, three of which were found to be seriously flawed.

At the time, LBWF’s Procurement Strategy promised that ‘Council procurement will be transparent, conducted via the Council’s e-tendering system and all suppliers treated fairly and consistently in accordance with Council’s Contract Procedure Rules and the Public Contracts Regulations 2015 (as amended)’.

But what the IAAFT uncovered were some extraordinary instances of (as it was later described to the Audit and Governance Committee) ‘non-compliance with existing Rules’, illustrated by the following:

Contract DN379738

‘Management could not provide evidence that a minimum of three written quotations were obtained prior to the engagement of the contract;

Management could not provide evidence that this contract was signed and sealed by the Head of Legal services;

There was no evidence of the ongoing contract management/strategy that takes place for this contract.

Contract DN360965

No evidence was provided to demonstrate that due diligence checks were performed prior to the commencement of the contract;

No evidence was provided to evidence that the successful supplier was notified using the “Successful Tender Letter” on Pro-Contract,

or that the letter was signed by a person with appropriate delegated authority…

The price of the Contract (£55,000) does not agree to [sic] the quotation (£45,000).

Contract DN406583

No evidence was provided to demonstrate that due diligence checks were performed prior to the commencement of the contract;

No evidence was provided to evidence that the successful supplier was notified using the “Successful Tender Letter” on Pro-Contract,

or that the letter was signed by a person with appropriate delegated authority…

Management did not provide evidence that the quotation responses were evaluated using the Council’s Evaluation Matrix’.

In response to these and related concerns, LBWF launched a review, and hired in Nigel Kletz, an experienced procurement practitioner, who in his nine years at Birmingham City Council had reportedly help reduce the cost of outside contractors by £60m..

Perhaps unsurprisingly, as this review proceeded, further issues emerged. There were, Mr. Kletz established, ‘many, if not too many, routes to procurement’; officers ‘worked under a series of recommendations rather than requirements’; and, most worryingly, in the existing rules, there was no mandatory obligation for contracts to be openly advertised, meaning officers were ‘free to select’ which suppliers they wished to receive quotations or tenders from, with the potential for malpractice or worse speaking for itself.

The upshot was the drafting of a new set of contract procedure rules, designed to deliver ‘certainty’, ‘consistency’, ‘probity’, and ‘best value’, and these currently are in the process of being considered by the LBWF hierarchy.

Two further remarks are apposite.

Between 2008 and 2010, LBWF was rocked by a series of scandals concerning how it spent public money. Brought in to assist, PricewaterhouseCoopers scrutinised 105 project files, and found, amongst other things, that only 8 per cent were supported by full and consistent budgetary data; 48 per cent did not include signed contracts; ‘the vast majority…had no evidence of tendering, or just a note about the tenders received but no actual further evidence’; and ‘All but 3 projects had no evidence of any data checking or auditing by the Council in respect of…the contract monitoring procedures’.

Separately, when attention was focused on a project that LBWF had commissioned from a provider called EduAction, it emerged that, first, the latter had not signed the contract, and second, ‘at the workshop developing proposals, EduAction representatives had stepped in and offered to provide services…[the] output levels and output criteria had come from EduAction…thus the eventual beneficiary of the funding played a part in framing the expression of need’.

When all this was reported in public (revealingly, only after extensive campaigning by a local resident) it provoked a good deal of LBWF hand-wringing, and promises that lessons already had been learnt.

In future, it was asserted, officers rigorously would respect each stage of the procurement process.

Against this background, the recent IAAFT report is, to say the least, very disappointing: the rhetoric of previous years has clearly been well and truly forgotten.

The other remark?

Mr. Kletz is no longer employed by LBWF.