PAPER B                          

Committee:    POLICY COMMISSION FOR ECONOMY, TOURISM, REGENERATION & TRANSPORT

 

Date:               8 NOVEMBER 2006

 

Title:                CONTRACT AWARDING, COMPLETION AND MANAGEMENT

 

 

 
 


SUMMARY/PURPOSE

 

1.                  The purpose of this report is to provide the Commission with the Legal Department’s view on compliance and management issues concerning the procurement, completion and management of goods, services and works contracts. 

 

PRESENT ISSUES

 

2.                  At present the Authority spends approximately £85 million per annum on the procurement of goods, services and works from external suppliers and contractors. Regulating this supply is a complex set of internal and external legislative rules and requirements which vary considerably depending on the particular goods, services or works being procured and their overall cost.  It is not the intention of this report to summarise these rules but to provide a brief report to the Commission on the following compliance and management issues raised by it:

 

(i)                  how the Authority currently manages contracts;

(ii)                 highlight the main areas of concern and suggest  what improvements could be made; and

(iii)               consideration of  the use of standard purchasing contracts/boiler plate clauses.

 

CURRENT CONTRACTUAL MANAGEMENT PRACTICE

 

3.                  The process of tendering for goods, services or works, preparing and completing the contractual documentation and then managing a contract/project is a process which varies depending on the size of the contract (measured in monetary terms).

 

4.                  For the largest of contracts, the Authority usually puts together a team of officers from separate departments, each with a complimenting knowledge and range of skills to manage a project from its inception to its conclusion.

 

5.                  Where a larger contract may run into difficulties is when the Authority fails to provide the project with adequate resources at its conception, in particular, when it fails to put together a team of sufficiently skilled officers to help establish the correct direction and identify and manage any foreseeable or likely risks.

 

6.                  For smaller contracts, the process is quite different.  An officer within a Department will usually be assigned the task of implementing the delivery of a particular good, service or works.  That officer will then approach the market and determine the most appropriate supplier.  Once the supplier and product/service is established the officer will arrange for terms and conditions of delivery and manage its inception.

 

7.                  This is an abbreviated version of the process and the most important aspect of its description is to identify the possible areas where contract management can fail.

 

8.                  At the outset, the individual officer must be aware of the Authority’s “Best Value”.

 

9.                  The officer must also be aware that legislative requirements may need to be adhered to depending on the contracts total monetary value. The Legal and Procurement Sections do not expect individual officers to have a detailed  understanding of the legislative requirements, only the monetary considerations which trigger their application and that if in doubt, consultation and advice should be sought.  Failure to properly comply with European Procurement Rules for example could lead to the imposition of penalties against the Authority.  This is separate to any losses which may be incurred in having to cancel and re-tender a contract.

 

10.              The officer must also be aware of the need to ensure that a contract is in place well before the good or service is delivered.  If a dispute eventuates during delivery, then the Authority will be at a clear disadvantage if contractual terms and conditions are not clearly defined and established.

 

11.              The contract documentation must be seen by the Legal Department and the Legal Department must be given sufficient time in which to consider and amend it where necessary.

 

12.              The role of the legal department is not just to scrutinise contractual documents but also the project itself and to ensure that Cabinet Reports have been correctly prepared (where applicable).  In addition, the Legal Department’s commercial experience and expertise is also applied in an assessment of the terms and conditions of the proposed delivery of goods or services. 

 

13.              Central to the proper and effective award and management of contracts is the engagement of Legal Services and the Procurement Department at the earliest possible opportunity.  At present there does not exist any formal structure in place which requires officers or Departments to ensure that contracts are assessed, approved and put into place by the Legal Department prior to the delivery or supply of goods/services or works. 

 

14.              The Legal Departments is therefore only able to provide assistance and advice on those acquisitions where the officer in charge has approached the department for assistance at the earliest possible opportunity. 

 

15.              If neither department is approached by an officer managing a commercial transaction then it is at immediate risk of:

 

(i)                  Being unlawful;

(ii)                 Being on terms and conditions that are unfavorable to the Authority; 

(iii)               Exposing the Authority to penalties/sanctions for breach of Procurement Rules;

(iv)               Incurring unnecessary and avoidable costs;

 

16.              A more detailed assessment of the Authority’s compliance with Procurement regulations and its processes for contract management was undertaken in July 2005 by an external auditing and consultancy firm, the QP Group.  I have enclosed a copy of the final assessment report prepared by the QP Group as it addresses in detail the issues which the Commission is looking to assess.

 

POTENTIAL IMPROVEMENTS

 

17.              The Authority has undertaken a number of initiatives in order to redress the potential risks outlined above, however more work can be done.

 

18.              The report prepared by the QP Group provides a number of recommendations and strategies aimed at redressing the ineffective procurement practices and it is this department’s opinion that these provide a solid basis for improving the Authority’s contract award and management practices.

 

19.              As a brief summary, those recommendations are:

 

Ø                  Increase the take up of procurement related training and communication across the entire Authority

Ø                  Put in place departmental liaison officers to aid key sourcing and procurement activities

Ø                  Create local procurement procedures and integrate with departmental procedures throughout the Authority to support CSO rules

Ø                  Process and communication stream lining between procuring departments and Legal Services to ensure engagement early in the procurement process, and to ensure contracts are completed before the commencement of Works

Ø                  Improvement to the CSO and other documents used – to improve processes and address areas of ambiguity

Ø                  Consideration of the appointment of a Procurement Strategic Director to help provide strategic direction and leadership, with Cabinet Member sponsorship

Ø                  Develop the role of the Procurement Unit as a proactive Authority-wide service provider, to ensure ongoing robust compliance to CSO and EC rules. Basic Procurement principles;

 

RECOMMENDATION

 

20.              We understand that the QP Group Report and its recommendations have previously been presented to the Director’s Group, however this took place at a point in time when the composition and structure of the Director’s Group was undergoing significant change.  This had a consequence on the ability to assess and act upon the Report’s findings.  We therefore recommend that it be tabled before the new Director’s Group for consideration.

 

APPENDICES

 

Appendix 1 - Procurement Compliance Assessment

 

Contact Point:      Helen Miles, ' 823288, email [email protected]