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]