PAPER B
SCRUTINY COMMITTEE FINAL REPORT
|
RESPONSIBLE BODY Scrutiny Committee |
||
|
ENQUIRY NAME USE OF OUTSIDE CONSULTANTS BY THE COUNCIL |
REFERENCE NUMBER SC10/06 |
|
|
1
OUTLINE OF ENQUIRY AND PROPOSED OUTCOME The scoping document approved by the
Scrutiny Committee at its meeting on 12 September 2006 approved an
enquiry which was :- 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 Undercliff Drive. |
||
|
2
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. 2.2
Consultants should only be appointed by designated officers after
they have satisfactorily concluded that the work cannot be undertaken by
existing staff resources. 2.3
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. 2.4
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. 2.5
A protocol should be formulated on the procedures for the engagement
of consultants similar to that adopted by Bath and North East Somerset
Council. 2.6
The appropriate Cabinet Member should be involved in the approval
process when consultants are to be engaged irrespective of the value of the
contract. 2.7
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. 2.8
Expenditure on consultants should be separately coded and recorded so
that such costs can be easily accessed. |
||
|
3
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 1 April 2005 to 31 March
2006 a total of £3,740,118 was spent on consultants and from1 April 2006 to
30 September 2006 this amounted to £1,494,364. This made a headline story in
the Isle of Wight County Press on 27 October 2006. 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 25 April 2001. This
defined such services as “any external organisation engaged to provide
professional advice and assistance for a finite period covering financial
support and advice, legal services, human resources advice and assistance and
management consultancy.” In the Management Consultancies Association
publication “How to Source and Manage Consultants and Contractors consultants
are described as project resources and used for a defined short term project,
which is non-routine and non-repetitive, requiring expertise not internally
available. A contractor is an operational resource which can be used on a day
to day basis to temporarily maintain an internal function and are managed
directly by the client. 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. |
||
|
4
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. 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 Bath and North East Somerset Council, have all implemented
enhanced procedures, or protocols, for the appointment of consultants. Many
of these arose because of similar issues being identified to those
highlighted during the course of this enquiry. 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 information
obtained by this exercise highlighted the requirement for a consistent
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 was 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 make any benchmarking
and comparisons very difficult. |
||
|
1) Scoping document for enquiry SC10/06 as approved by the Scrutiny Committee on 14 September 2006. http://www.iwight.com/council/committees/Mod-resources%20select/7-4-05/minutes.htm 2) Report to the Resources Select Committee – 7 April 2005 – Use of Consultants – Head of Select Committee and Review. http://www.iwight.com/council/committees/Mod-resources%20select/7-4-05/Paper%20C.htm 3) Minute from the Resources Select Committee – 7 April 2005. http://www.iwight.com/council/committees/Mod-resources%20select/7-4-05/minutes.htm 4) Report to the Audit Committee – 12 January 2006 – Chief internal Auditor – Internal Audit Outcomes plus minute of that meeting. 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 24 March 2005 from the Chief Financial Officer and letter to Mr Penn dated 10 February 2005 from the Purchasing Manager. 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) Surrey County Council – Report on Use of Consultants – 24 February 2004. 11) Worcestershire County Council – report on use of Consultants – March 2005. - http://www.cfps.org.uk/pdf/review/944.pdf 12) Information from Authorities within the New Unitary Authorities Benchmarking Group. 13) North East Lincolnshire Council – Scrutiny Report on the Engagement of Consultants – October 2006. - http://www.cfps.org.uk/pdf/review/1767.pdf 14) Code of Practice from North East Somerset Council. 15) Purchasing Professional Services – National Audit Office – 25 April 2001 – http://www.nao.org.uk/publications/nao_reports/00-01/0001400.pdf 16) Central Government’s Use of Consultants – National Audit Office – 15 December 2006 http://www.nao.org.uk/publications/nao_reports/06-07/0607128.pdf 17) Report to the Policy Commission for Economy, Tourism, Regeneration and Transport – 8 November 2006 – Contract Awarding, Completion and Management 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, London – February 2007- http://www.lcpe.gov.uk/Consultancy/Project_Summary.asp |
||
|
Prepared by: Date: |
Cllr Deborah Gardiner (Lead Member), Cllr Anne
Bishop and Mrs Sue Poston. Paul Thistlewood and April West, Overview &
Scrutiny Team March 2007 |
|