PAPER C
SCRUTINY COMMITTEE FINAL REPORT
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RESPONSIBLE BODY Scrutiny Committee |
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ENQUIRY NAME USE OF OUTSIDE CONSULTANTS BY THE COUNCIL |
REFERENCE NUMBER SC10/06 |
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OUTLINE OF ENQUIRY AND PROPOSED OUTCOME The scoping document approved by the
Scrutiny Committee at its meeting on To
examine the current policy and practice of the Isle of Wight Council in the
procurement and use of consultants. To
examine how much is spent on consultants by the Council, who are the decision
makers and how consultancy expenses are accounted/budgeted for. To
examine what systems exist for monitoring progress and evaluating outcomes. Whether
the Council is getting value for money. The
intention of the enquiry was to satisfy the Committee that
the current policy was appropriate and adhered to in all circumstances and to
consider recommendations for future policy and practice. The enquiry has not been
involved at any stage with the current situation involving the appointment of
consultants for the highway scheme at |
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RECOMMENDATIONS The following recommendations are
made to the Cabinet Member for Resources and Town and Parish Empowerment :- 2.1
To ensure complete transparency with the appointment of all consultants
a robust audit trail should be created and maintained to the satisfaction of
the Council’s Monitoring Officer, Chief Financial Officer and Compliance
Officer. They should also be responsible for any action arising from
enforcing adherence to Council policies. 2.2
The resource and operational implications of the Purchasing Section being
involved in the issuing of advice, guidance and monitoring on the purchase of
all goods and services obtained on the Council’s behalf, including the
engagement of consultants, should be fully investigated. 2.3
Consultants should only be appointed by designated officers after
they have satisfactorily concluded that the work cannot be undertaken by
existing staff resources. 2.4
All designated officers should receive specific training in project
management, together with legal and financial requirements, when using
consultants and that these should meet on an annual basis to discuss any
amendments necessary to Contract Standing Orders or related procurement
processes. 2.5
Expenditure specifically on the engagement of any consultant should be
appropriately coded to enable it to be readily identifiable and this be
monitored when required by Cabinet Members and on an annual basis by the
Scrutiny Committee. 2.6
A protocol should be formulated on the procedures for the engagement
of consultants similar to that adopted by 2.7
The appropriate Cabinet Member should be involved in the approval
process when consultants are to be engaged irrespective of the value of the
contract. 2.8
The Council’s Internal Audit Section should, on a yearly basis, review
a sample of cases where consultants have been appointed to ensure that all
relevant processes have been complied with. 2.9
Expenditure on consultants should be separately coded and recorded so
that such costs can be easily accessed. |
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BACKGROUND TO THE ISSUE 3.1
The Scrutiny Committee was aware of public concern as
to the amount of money the Council spent on the appointment of consultants. A
Freedom of Information request indicated that during 3.2
For the purposes of the enquiry the term
consultant was deemed to be a person or company appointed
by the Council on a fee basis to provide advice to the Council particularly
on a strategic or specialist area. It did not extend to contractors who
undertook physical works or the supply of goods. This is in line with the
definition of professional services given in the National Audit Office’s
publication “Purchasing Professional Services” issued on 3.3
The Council’s previous Resources Select
Committee undertook a review on the use of consultants in 2005. This was prompted
by similar public concerns as to the costs involved. 3.4
Another area of concern was awarding of a
second phase of work to the same person/company without any tendering process
being initiated. In a very small number of cases these could lead to non
compliance with EC Directives because of the combined sums involved. 3.5
The Council use consultants on a regular basis for
architectural, engineering and legal work. In scoping the enquiry the
Committee was aware that there was normally no other cost effective or in
house solution available either because the work was linked to a capital
scheme or the Council required independent specialist advice. Therefore the
enquiry concentrated upon professional advice on corporate areas such as
Information Technology, Recruitment, Change Management, Communications and
Consultation. 3.6
The appointment of Consultants is covered
by the provisions of the Council’s Contract Standing Orders. These (2.3.5)
outlines in 2.3.5 the thresholds for seeking competitive quotations or
tenders as follows :- Below
£10,000 – No formal competition required although quotations can be sought in
order to demonstrate best value. £10,000
- £75,000 – At least 3 quotations. £75,000
– Invitations to Tender. £3,834,411
and above (works) or £485,481 and above (Goods and Services) – Publication of
Prior Information Notices (in accordance with EU Procurement Directives). £3,834,411
and above (works) or £153,376 and above (Goods and Services) – Invitations to
Tender in accordance with EU Procurement Directives. |
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KEY ISSUES
IDENTIFIED 4.1
The concerns as to the use of consultants is not just
restricted to this Council as many other Authorities have undertaken similar
scrutiny exercises on this. In addition reports have recently been published
by the National Audit Office, Management Consultancies Association, Office of
Government Commerce and the London School of Excellence all to do with
processes connected with the use of consultants. 4.2
The Council’s
Contract Standing Orders (CSO’s) set out the key principles and responsibilities
for the procurement of goods and services. These are reviewed on an annual
basis. There is no specific mention of consultants. In undertaking the
enquiry the Scrutiny Committee became aware that a number of authorities had
adopted specific wording within its Contract Standing Orders (West Berkshire
Council), a separate criteria (Worcestershire County Council) or a Code of
Practice (North East Somerset Council). Due to the ongoing likelihood of the
Council requiring a range of activities to be undertaken by Consultants there
is a need to consider introducing an enhanced process to ensure a clearer
audit trail. 4.3
Directorates appear to appoint consultants in different ways and this
leads to a lack of consistency in record keeping. A corporate process with
standard forms would overcome this and ensure that all proper processes have
been taken into account prior to appointing consultants. It would also assist
in cases where an officer leaves the Authority and information on a contract
is required at a later date. 4.4
Although the
Council did not appear to have encountered any difficulties with the
performance and obligations of Consultants the Legal Section only had limited
involvement in the appointment process. Its role was therefore reactive
rather than proactive and there was a risk element if this continued. The
involvement of the Legal Section in all contracts would have a resource implication
but this would ensure that the Council had more effective control of all
foreseeable outcomes. This may require the Council to consider the
appointment of additional solicitors to deal with this workload. It may be
appropriate for these to have commercial experience due to the nature of the
work involved. 4.5
The ability of
the Council to undertake some of the work currently awarded to consultants by
in house staff was an area that should be further explored. The continual use
of consultants in some areas did not enable the Council to grow its own
expertise. The majority of work undertaken by consultants was pre-planned well
in advance. This could enable the Council’s Director of People and
Organisation Development to ascertain what skills were required for a
relevant member of staff to receive training so that the work could be dealt
with in-house. The Directors Team should therefore consider the areas where
consultants were being considered to enable an in house skills audit to be
completed to see if there was a suitable cost effective alternative. 4.6
When
considering the use of a consultant for a piece of work consideration could
be given to whether it would be appropriate and cost effective for the
contract to include the provision that the consultant should be shadowed by
an officer of the Council. This would assist in the Council gaining knowledge
of commercial practices 4.7
There was no central
co-ordination of processes connected with the appointment of consultants. The
Procurement Section dealt with a wide range of activities but did not have
any major direct influence over the appointment process other than offering
general advice when requested. The Section has very little involvement in a
large proportion of the goods and services obtained by service departments on
the Council’s behalf. Consideration should be given to this Section playing a
key central role in advice and monitoring of all expenditure on purchasing. 4.8
There is a
degree of difficulty in identifying the actual costs of using consultants. A
recent request made under the Freedom of Information Act highlighted that
there was a need to be able to more effectively identify expenditure.
Directorates should be more rigorous in the financial coding of such
expenditure so that this can be more readily monitored. 4.9
There can also
be confusion over instances where consultants are used as an interim measure
whilst the Council decides upon staffing structures. As such these
arrangements still need to be properly managed as payment is often on day
rates. It is important however that the use of consultants on this basis is
not as a long term substitution for full time Council staff. 4.10
The outsourcing
of work, such as specialist IT support, should not be seen as Consultancy as
this is normally for a period of a number of years. It does still however
need to be properly recorded. 4.11
The Council’s
existing Contract Standing Orders refers to “the purchase of goods, services
or works from a supplier, contractor or other entity” (2nd
paragraph of CSO). The only time the word consultant is used is in 1.5.4
which states – “Consultants acting as an agent on behalf of the Council are
required to operate in accordance with these CSO’s. It is the responsibility
of the officer engaging the consultant to ensure such compliance. Furthermore
the selection and engagement of consultants is a procurement in itself and
therefore subject to these CSO’s.” 4.12
The lack of
inclusion of the word Consultants throughout CSO’s could be considered a
weakness and give officers the impression that contractual arrangements with
consultants are different from the procurement of goods and services despite
the specific wording in 1.5.4. 4.13
In paragraph
2.10.4 of CSO’s it states – “ The officer awarding the contract shall send a
completed Contract Register Form to the Procurement Section within 2 weeks of
award of contract so that the Council’s Contracts Register can be updated.”
It does not appear that this is being complied with on all occasions. It is
necessary for officers responsible for engaging consultants to ensure that
there is a clear audit trail not only to safeguard them but to assist in
performance management. 4.14
The Committee
has become aware of a number of authorities which have undertaken a similar
enquiry and identified good practice. The authorities involved,
Worcestershire County Council, Surrey County Council, North East Lincolnshire
Council and 4.15
The Council’s
CSO in 1.5.3 states – “A library of relevant procurement information and good
practice guidance shall be developed and maintained on the Council’s Intranet
by the Procurement Section”. This is not easy to find on the site and
because of the overall corporate importance of procurement should have a more
straightforward route to access all relevant information. 4.16
If the Council did not make use of consultants it would have to
employ additional staff, many with special expertise, to undertake to work. It would be inappropriate for the Council to
employ staff purely to overcome short term capacity issues or a specific
capital scheme. A view could also be expressed that if the Council did not
employ any consultants then its staffing levels were too high. 4.17
Revised
procedures are required but it is important that these are not unduly
bureaucratic and time consuming. There needs to be a balance struck between good
governance arrangements and less burdensome administrative processes. 4.18
One major area
of concern relates to instances where a consultant who is already working for
the Council on one project is then given an additional piece of work, because
of their initial involvement, without going through the competitive tendering
route. There is a need for either such work to be better planned or a
stringent process introduced to ensure that the Council is obtaining best
value. 4.19
It is clear
that not only is it necessary to have robust processes in place but that these
are fully understood by all those officers delegated to commission work by
consultants and also fully utilised in all instances. It should be made clear
to officers that appropriate disciplinary action may result from non
compliance with any of the laid down procedures. Additionally all officers involved
in letting contracts should meet on an annual basis and feed into any review
of the processes. 4.20
The Task Group
dealing with the enquiry sought initial information from Directors on the
appointment of consultants between 2004 and 2006. This was to ascertain the
number of occasions that these had been appointed, the process used, who
appointed, why appointed, budget and monitoring. A second stage was then
undertaken focussing on five particular contract areas. The details contained
on the Council’s intranet regarding exception reporting were also looked at. 4.21
The difficulties
in obtaining relevant information for this enquiry highlighted the
requirement for a consistent authority wide approach in the appointment
process for consultants, particularly in relation to a formal contract even
though the successful company may be the only tenderer. All the work however
appeared to have been delivered either within the quoted price or slightly
below with expenses included within this figure. 4.22
It has been
difficult to quantify as to whether the Council is getting value for money
from using consultants. Much depends on the type of work being undertaken and
in many cases this can be unique to the Council and therefore any
benchmarking and comparisons are very difficult. 4.23
The Committee recognise that a simple way forward would be for all
officers to be reminded of the existing process that should be followed when
engaging consultants, subject to increased internal monitoring. It however
believes very strongly that the opportunity should be taken to have a
complete review to ensure a more robust, consistent and transparent process. |
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1)
Scoping document for enquiry SC10/06 as
approved by the Scrutiny Committee on http://www.iwight.com/council/committees/Mod-resources%20select/7-4-05/minutes.htm 2)
Report to the Resources Select Committee – http://www.iwight.com/council/committees/Mod-resources%20select/7-4-05/Paper%20C.htm 3)
Minute from the Resources Select Committee – http://www.iwight.com/council/committees/Mod-resources%20select/7-4-05/minutes.htm 4)
Report to the Audit Committee – http://www.iwight.com/council/committees/Audit%20Committee/12-1-06/Paper%20B.htm 5) Internal Audit Services report – Appointment of Consultants. 6)
Letter to Mr Kyle dated 7) Details of payments to consultants 2003/04. 8) Details of payments to consultants 2006/07. 9) Contract Standing Orders. - http://www.iow.gov.uk/council/what_is_a_council/images/Constitution.pdf 10)
11)
12) Information from Authorities within the New Unitary Authorities Benchmarking Group. 13)
North 14)
Code of Practice from North 15)
Purchasing Professional Services – National
Audit Office – http://www.nao.org.uk/publications/nao_reports/00-01/0001400.pdf 16)
Central Government’s Use of Consultants –
National Audit Office – http://www.nao.org.uk/publications/nao_reports/06-07/0607128.pdf 17)
Report to the Policy Commission for Economy,
Tourism, Regeneration and Transport – http://www.iwight.com/council/committees/Policy%20Commission%20for%20Economy/8-11-06/Paper%20B.htm http://www.iwight.com/council/committees/Policy%20Commission%20for%20Economy/8-11-06/minutes.htm 18) Delivering Value from Consultancy – Management Consultancies Association/Institute of Management Consultancy/Office of Government Commerce http://www.ogc.gov.uk/documents/DeliveringValueFromConsultancyCP0076.pdf 19) Delivering World Class Consultancy Services to the Public Sector – A Statement of Best Practice - Management Consultancies Association/Institute of Management Consultancy/Office of Government Commerce http://www.mca.org.uk/mca/pdf/publicsectorstatementbestpractice.pdf 20) How to Source and Manage Consultants and Contractors – Management Consultancies Association 21) Getting the Most Out of Management Consultants – Management Consultancies Association 22) Towards a National Strategy for Local Government Procurement – Office of the Deputy Prime Minister/Local Government Association – July 2002 – http://www.publications.communities.gov.uk/pubdetails.asp?pubid=269 23) Centre for Public Scrutiny paper produced in association with the Local Government Association – In the Spotlight – Scrutinising Strategic Procurement. 24)
Commissioning Toolkit for the Procurement of
Consultancy and Professional Services – Centre of Excellence, |
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Prepared by: Date: |
Cllr Paul Thistlewood and April West, Overview &
Scrutiny Team March 2007 |