Agenda item

Consideration was given to a report, presented by Holly Wilson, Head of Procurement, which detailed all breaches and waivers to the Council’s Procedure Rules (CPRs) for the period 1st September 2022 to 28th February 2023.  The report provided a summary of the number of new waivers and breaches recorded for each Directorate since the last audit reports presented to the Committee in October 2022 and April 2022 and a summary of the progress made in addressing breaches to Contract Procedure Rules.

The Head of Procurement provided an overview of the breaches and waivers. Sixteen waivers had been granted for the period, which was a slight decrease to the seventeen waivers reported during 2021/22.  Five breaches have been resolved and the breach in relation to the Meat products contract were expected to be resolved very soon. There were four new breaches in the Economy, Environment directorate, two of which related to aggregated spend, and two related to the expiry of contracts. In relation to new breaches, one relating to the contract for ventilation supplies was due to be awarded and resolved in April 2023. Further to a request by the Committee at its last meeting, Members’ attention were drawn to Appendix 3 of the report, which set out details of the percentage of waivers granted against the total value of contracts.  Paragraphs 21 to 27 of the report provided an update on the actions emanated from a previous meeting relating to reviewing the Procurement teams arrangements in terms of projects and enhancements, in particular, with regard to improvements compliance and contract mapping which have all been actioned.

In responding to questions regarding the resolved breaches, which related to the expiry of contracts, the Head of Procurement explained the reasons why they had occurred and provided assurances to the Committee that steps that had been taken by the Procurement team to ensure that administrative oversight did not occur in the future.

With regard to clarity being sought in respect of the two new breaches relating to aggregated spend, as detailed at sections 2.1 and 2.3 of Appendix 1 of the report, the Head of Procurement explained the process used to aggregate and to monitor the total amount spent in respect of contracts. It was noted that the minimum requirement for contracts to be procured was 3 to 6 months and that contracts exceeding the £25,000 direct award threshold would be a breach of CPRs. Any contracts reaching the threshold would be flagged up to the relevant Heads of Service and the Assistant Director as part of the quarterly monitoring process. It was further reported that the Council in recent years have spent less on supplies and that the Procurement team review historical data, which was used by Officers to dictate what CPRs Officers were to follow in terms of whether or not to tender for contracts. Whilst the Council endeavoured to get best value for money, more money has been expended on these contracts due to the cost of supplies, which was attributed to the significant rise in inflation. The Procurement team were to flag up any matters that were to reach the threshold at an earlier stage in order that Heads of Service and the Assistant Director to take action.

Following further questions from the Vice-Chair regarding whether the two new breaches regarding relating to kitchens and ventilation supplies could have been avoided if they had been closely monitored by Officers, it was acknowledged that the frequency for the monitoring of such contracts in future were to take place on a monthly basis, in advance of the quarterly monitoring report being presented to management. This would ensure that Officers could intervene at an earlier stage in the process. It was explained that the spending on materials and supplies varied dependent upon the need during the year.

In relation to the breaches where currently there were no contracts in place, Members were informed that the reasons for the expiry of those contracts were not due to lack of planning but mainly were due to a number of issues, in particular related to changes in capacity of staff which was currently being reviewed and supply chain issues. Due to inflation, building merchants were unable to guarantee the same prices and the same quality of materials as done previously. The Head of Procurement gave assurances that mitigations were in place to address this issue. She emphasised the need for a review to be undertaken by the Procurement team in relation to purchasing of materials and supplies to achieve better value. 

In response to further questions, the Head of Procurement outlined the IT systems in place to improve contract compliance, including the new Procurement Planning module, which is part of the YorTender electronic tendering system, where  information regarding procurement tender projects is stored, which allows for better planning and visibility of procurement projects. It was noted that periodic updates are provided to management on contracts relating to their service area and a spend analysis is carried out by the Procurement team, clearly setting out timescales, alerting contract owners when contracts where to expire. The Monitoring Officer provided further reassurance that arrangements were in place to improve procurement practices and effective controls to monitor breaches.

Arising from clarity being sought by the Chair as to whether implementation of the new procurement planning module was on target, the Head of Procurement confirmed that it was anticipated for completion on 30th April 2023. The Chair pointed out that some suppliers may not want to bid for fixed priced contracts and asked the Head of Procurement to consider a financial limit being set for each contract, which would avoid the occurrence of breaches to CPRs.

The Vice-Chair welcomed the recent changes made by the Procurement team in monitoring contracts and the assurance provided by the Monitoring Officer that arrangements to monitor contracts were robust and compliant. However, having previously discussed this issue with the Chair of the Committee and the Head of Internal Audit, felt that a zero-tolerance approach should be taken in respect of breaches.  He therefore, requested that Officers be invited to attend Audit Committee meetings to provide an explanation as to the reasons for the breaches.

The Chair, whilst welcoming the continued improvement in terms of the low number of breaches and waivers, the work undertaken by the Procurement team, the Assistant Director for Finance and the Monitoring Officer to reduce breaches and monitor and refine the procurement process, as set out at paragraphs 21 to 27 of the report, highlighted his concerns that Officers procuring services should have an awareness of the Council’s Contract Procedure Rules, and waivers should only happen in exceptional circumstances.  To ensure Officer compliance of CPRs in the future, he requested that consideration be given to those Officers who have responsibility for procuring contracts to receive mandatory training on the Council’s Contract Procedure Rules, so that they have a clear understanding of their responsibilities when tendering for contracts.  The Chair in echoing the comments from the Vice-Chair agreed that there should be no breaches. He did however acknowledge the difficulties faced by the team in predicting and monitoring costs. However, in noting, the majority of the breaches related to existing contracts which had expired, or contracts that had come to an end, as detailed at Appendix 1 of the report, the Chair raised concerns regarding the reasons given by Officers for the breaches, which were the same reasons submitted in the previous update report to the Committee.  He was also concerned regarding Officers deviating from the process.

In welcoming the feedback from the Chair and Members, the Monitoring Officer reassured the Committee that waivers were signed off by himself and the Head of Procurement and gave an undertaking to communicate to senior management the Audit Committee’s concerns, and that Officer training to be reviewed to ensure that it was targeted to those service areas where there were problems. Officers would explore training with budget holders and joint training. He explained that the Council’s contract requirements endeavoured to deliver both products and best value and spend locally and hoped that when the update report was presented to the next meeting, the Committee Members would see a further reduction in breaches. The Assistant Director for Finance added that the Procurement team could look at processes to escalate breaches.

During further discussion regarding breaches, it was noted that due to current inflation, the £25k threshold for contracts had been significantly devalued. The Director of Corporate Resources advised that the thresholds had been set some years ago, therefore, suggested that it would be an opportune time to review the level and nature of spend in relation to procurement activity taking place across the Council, and that a benchmarking exercise be undertaken of neighbouring authorities to determine whether amendments were required to the Council’s thresholds. The Head of Procurement reported that she was aware that other local authorities in the region were enacting different thresholds for different categories of spend and gave an undertaking to provide the Committee with benchmarking information at a future meeting.

In response to a question from the Vice-Chair querying some of the purchases made under the new Purchasing Card Policy and whether these were compliant with the Policy.  The Head of Procurement advised that the Policy had been approved, but the monitoring of compliance had not yet commenced. Following a request from the Vice-Chair, she agreed to provide the Committee with statistics in relation to the number of breaches under the policy at a future meeting.

In reference to the waivers, Officers responded to questions from Members seeking clarity and assurance was provided, in relation to the waivers in the Adults, Health and Wellbeing Public Health directorate relating to substance misuse and homelessness, document storage and Smart bins in the Corporate Resources and Economy Environment directorate, respectively, as outlined in the Appendix 2 of the report.

To conclude, the Chair highlighted the important role of the Procurement team who have provided assistance to the Audit Committee and stating that the Council was currently in a relatively good position which was attributable to the improvements of both the Procurement team and the Audit Committee.

RESOLVED that

(1)    the waivers and breaches recorded for the period between the 1st September 2022 and the 28th February 2023, be noted; and

(2)    the work undertaken by the Strategic Procurement Team (SPT) to ensure compliance and deliver services, be noted.