A “number of errors” led to the value of a council contract for wall and roof installation soaring by over £400,000 without the “necessary permissions”.
East Renfrewshire Council handed out a £1.79m contract for work which has now hit over £2m and is expected to reach £2.2m — but approval for the increased cost was not secured from cabinet members.
Council officials have now reported contract standing orders were “not complied with” and an “over commitment occurred before the probable outturn” had been established.
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Councillors in the cabinet will be asked to retrospectively approve the new price on Thursday.
“Regrettably in this instance the appropriate mechanisms to approve overspend of the contract value were not adhered to and therefore retrospective permission for the overspend is sought,” a council report stated.
“Procedures have been reviewed to ensure that this error is not repeated.”
The council must ensure its housing meets efficiency standards and awarded a contract for external wall and roof insulation to Procast Building Contractors Ltd in December 2021.
Initially expected to cost £1.79m, there is now expected to be an overspend of £409,650 — 23% of the contract value. Contracts standing orders state that all “variations greater than £100,000 must be reported to cabinet for approval prior to variation being instructed”.
If the required change is urgent, it can be approved by two members of the cabinet and reported to all members “as soon as practicable”.
However, in this case the standing orders were “not complied with as the required approval to vary the contract was not sought and obtained in advance from cabinet”.
Explaining the errors, the council report stated previously contractors had been asked to provide a cost per property but this project was tendered using a ‘bill of quantities’, which was a new methodology to officials.
It added the bill includes “details of materials, labour and other work requirements, with estimated quantities for each”. The contractor then “prices the bill for tendering purposes”.
The contract has been described as “the most economically advantageous tender” but “a number of errors occurred” with its management in “relation to the financial monitoring of spend against contract sum”.
“The unit costs per property were unknown at the beginning of the contract and should have been established as soon as possible,” the report added. The number of properties passed to the contractor “could have been more closely monitored until the costs were known”.
“The number of properties the contractor was working on determined the final contract sum. As such an over commitment occurred before the probable outturn was established.
“This meant that the value of the contract was exceeded without the necessary permissions to exceed spend being obtained. The fact that this was a bill of quantities contract and a new methodology exacerbated these difficulties.”
Officials have reported, as a consequence of the error, more regular monitoring of contract spend against budget will be carried out and a “range of other control checks have been implemented”.
More staff are being sought to “increase capacity for additional contract scrutiny” and training on standing orders has been delivered. The council’s chief executive has also referred the issue to the chief auditor for review.
The report added: “It is important to note that the procurement team carried out a best value comparison with other councils to establish the contractor’s costs for similar projects and these costs were still found to be comparable.”
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