More than 500 contracts dealt with by Liverpool Council did not comply with its own processes, an assessment by external investigators has established.
Last year’s damning Caller Report, which led to the appointment of government commissioners at the council, placed an intense focus on how the local authority manages procurement. Further pressure engulfed the authority following the expensive energy contract debacle revealed in May and a failure to renew more than a dozen “high level” contracts.
As a result, Liverpool Council appointed 4C Associates to embark on a six-week period of work assessing more than £550m of spend in the last financial year to help shape its procurement improvement plan. While its new plan makes almost 50 recommendations of “improvement opportunities,” a wider assessment identified how hundreds of contracts were exempt from the local authority’s standing orders and could have cost the council up to £50m.
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Contract Standing Orders (CSO) are applicable to all the council's officers when procuring contracts for works, services and goods. They provide a legal framework to ensure a transparent approach and enable the council to achieve value for money. This has been called into question by 4C Associates and an opposition councillor in their assessment of the situation.
In its report, which was discussed by its finance and resources select committee on Tuesday, the firm said 555 approved exemptions were recorded in 2021/22, with an estimated contract value of £32m. The report said this was “abnormally high” particularly when compared to other public sector organisations.
It added how it was “unclear how value for money is being determined where a contract is exempted from the appropriate process.” The assessment also found the quantity and value of exemptions were indicative of “a lack of capacity and planning, leading to an exemption heavy and unsustainable fire-fighting culture.”
4C Associates said that anywhere between 4 and 9% in revenue had been lost as a result of poor procurement. The six-week tender by the procurement specialists cost Liverpool Council an additional £164,000.
Their investigation found that the authority’s current system is “fragmented, overly complex and poorly understood.” The bulk of the exemptions came within the regeneration and employment directorate with 167 recorded.
A further 139 fell under the auspices of children and young people, while 76 were in relation to finances and resources. 4C Associates said there was a “requirement to filter out the genuine (unavoidable) and malpractice (avoidable) exemptions” while the justification for exemptions should be robust, unambiguous, and only accepted in unique or extreme circumstances.”
The “significant” number of ‘Unforeseen Urgent Requirement’ occurrences illustrated poor risk management and forward planning, it was claimed. Cllr Andrew Makinson, deputy leader of the Liberal Democrat group, sits on the authority’s finance and resources select committee. He said: “This is a shocking record of failure by this Labour council.”
“In some cases there may be innocent explanations, but many of these failures are due to incompetence and poor management, and there will have been many opportunities to hide fraud amongst this. I’m particularly alarmed that £2.5m of construction contracts have broken these rules, especially after the many concerns about this raised in the Caller Report.”
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