Agenda item

Report of the Interim Corporate Director Finance and resources

Steve Oakley, Head of Contracting and Procurement, introduced the report providing information to the Committee on 2, linked internal audits around Contract Management and Procurement Dispensations. He highlighted the following information:

(a)  A number of actions were highlighted for implementation across the Council to ensure that  Contract Procedure Rules are complied with and best value for money is achieved. This will bring the Authority in line with best practice recommendations and allow robust process to be implemented around contract management and procurement;

(b)  The Audit of those procurements where dispensation was granted found that a significant number would have provided better value for money had it gone out to market for the full tender process. All these procurements were below Procurement Regulations thresholds;

(c)  The introduction of Oracle Fusion is changing the way contract management takes place. It is now not possible for a team to spend more the £25,000 a year without the procurement and contract management team being informed so that checks to ensure that the correct tender process/quotes are in place, can be made;

(d)  Procurement plans are being collated for all directorates so that there is a good understanding of what procurement activity needs to take place when to ensure continuation of service provision, but also to allow time for best value for money to be achieved. CLT and divisional meetings allow work on these procurement plans for each division to be put in place ;

(e)  The team are now working with PriceWaterhouseCooper (PWC), to analyse the spend data and establish by comparison to best practice whether best value has been obtained by the method of service provision and contract or direct provision arrangements in place. The aim is to spotlight areas which require further work;

(f)  Work is also underway to establish how Contract management can be done more efficiently and effectively across the Council, ensuring proactive rather than reactive working practices, with a procurement pipeline enabling the Council to get upstream of any issues and identifying areas that the procurement team needed to be aware of; 

(g)  The contract management audit highlighted that systems currently in place are not reflective of best practice for contract management. New ways of working are being developed and implemented to ensure that best practice in contract management is established across all teams;

(h)  In recent years there has been a significant rise in the number of waivers of financial regulations to allow issuing of contracts without the full tender process taking place. A small number are for good reason, and could not have been avoided, however there are a large number that could have been avoided had best practice been in place. With the introduction of new working practices, there will be regular testing to ensure that best value for money is achieved. It will also ensure that suppliers do not get complacent and offer competitive pricing and good quality products/services;

(i)  Breaches of the Financial Regulations can result in comments by external auditors and qualifications being made within their annual report. However with the introduction of the new best practice methods this should be avoided;

Committee members asked a number of questions and commented on the content of the report. The following points were highlighted throughout the discussion:

(j)  Standard training for all colleagues involved in contract management and procurement is being developed with specialists being provided with training through the Government Commercial College. Training will also be available to Portfolio Holders to give a greater depth of understanding around methods and reasons for best practice;

(k)  Procurement plans are being established for all directorates to ensure proactive work on procurement rather than reactive work that requires dispensation from contract procedure rules. This will ensure best value as well as ensuring continuity of services;

(l)  Any contract issued with a value over £25,000 will be published on the contracts register. This is a result of the controls implemented in Oracle Fusion. In the past this has not always been the case. Officers lead the process of procurement and the contract is awarded to the most competitive bidder according to predefined criteria.

(m)There is no scope for Officers or Councillors to influence the selection or put pressure on the procuring team to choose a specific contractor. Procurement processes include declarations of interest process where there could be a perception of bias. Procurement arrangements delegate contract award to named officers.

(n)  Political interference with appointment of contract providers is illegal. The Procurement and Contract Management Team regularly monitor what is happening at other councils across the country where regulators find breaches. The team then compare working practices to establish if any changes need to be made in Nottingham to fully conform to best practice;

(o)  The new arrangements would enable the Council to be clear about existing and future procurement, to comply with regulations and best practice, to manage workload based on value and risk through agreed additional capacity, and to drive social and environmental value including the Council’s Carbon Neutral agenda through a new Procurement Plan.

(p)  The Interim Corporate Director of Finance and Resources confirmed that despite the expense of working with external partners, like PWC, it would be possible to demonstrate savings that outweigh the expense;

(q)  Committee members felt that a method to review how Area Based Grants are spent and Council funding of other organisations would be beneficial. This area of spend is monitored and will be subject to the new, best practice ways of working. The Interim Corporate Director for Finance and Resources agreed that this was a good challenge from the Committee and confirmed that he would take this away and look closely at it including consideration of declarations of interest and in year review of related party transactions;

(r)  Group Companies have a degree of independence, and whilst it is possible to try to establish a consistent policy through the Shareholder Unit, companies are not bound by the same rules as Local Authorities around contract procedure. It is possible to enact a Group Standard, within which the companies have operational freedom, and act within the particular regulations that apply to them;

The Chair agreed that following on from work by PWC, Steve Oakley, Head of Contracting and Procurement, in consultation with her, would pick out high value contracts to bring back to a future committee date.

Resolved to:

(1)  Note the actions already completed in response to the internal audits, and the impact of these actions on assurance;

(2)  Note the actions planned and being implemented, and the impact that these will have on future assurance; and

(3)  Note the use of PWC to support improvements.